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50= 51= THE COURT: PLEASE BE SEATED. GOOD MORNING,
52= COUNSEL. 53= MR. PETROCELLI: GOOD MORNING, YOUR HONOR.
54= MR. WELSH: GOOD MORNING, YOUR HONOR. 55= THE COURT: SMALL HOUSEKEEPING MATTER. THANK YOU
56= VERY MUCH FOR SENDING ME A BONA-FIDE STIPULATION I HAVE ALSO 57= SIGNED, AND I WANT, IF YOU PLEASE, TO CHANGE THE TIME OF
58= GETTING THE DAILY MEMO TO 3: 00 O'CLOCK INSTEAD OF 5: 00 O'CLOCK. 59= AND NOW, WITH RESPECT TO MS. SEE'S TESTIMONY, AFTER
60= OUR SESSION YESTERDAY AFTERNOON, AS I INDICATED, I THOUGHT I 61= SHOULD MAKE A CLEARER STATEMENT.
62= NOW, AS I'VE INDICATED, THE COURT NEEDS ASSISTANCE 63= IN INTERPRETING THE DOCUMENTS IN THE CASE, AND THE INVOICES AND
64= OTHER DOCUMENTS DON'T SPEAK FOR THEMSELVES BECAUSE THEIR 65= MEANING IS NOT CLEAR TO A LAY PERSON.
66= NOW, I'VE ALREADY FOUND THAT MS. SEE QUALIFIES AS AN 67= EXPERT IN THE BOOK INDUSTRY, AND YESTERDAY AFTERNOON, FOR
68= EXAMPLE, HER EXPLANATION OF THE HOLIDAY FEATURE PROGRAM 69= DOCUMENTS WAS HELPFUL TO THE COURT, AND SO SHE MAY, OF COURSE, 1
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70= TESTIFY, PURSUANT TO RULE 702 OF THE FEDERAL RULES OF EVIDENCE, 71= ABOUT HER EXPERT OPINIONS FORMED FROM REVIEWING SUCH DOCUMENTS.
72= THE DIFFICULTY THAT THE COURT HAS HAD IS THAT THE 73= PLAINTIFFS ARE PRESENTING EXPERT TESTIMONY ABOUT DOCUMENTS FROM
74=
75= THE DEFENDANTS WHICH ARE NOT YET IN EVIDENCE, AND MS. SEE 76= CAN'T, OF COURSE, LAY THE FOUNDATION FOR THE ADMISSIBILITY OF
77= THE HOLIDAY FEATURE PROGRAM DOCUMENTS. 78= IN THE ADVISORY COMMITTEE NOTES TO 703, AND I QUOTE
79= IT, "THE UNDERLYING INFORMATION IS NOT ADMISSIBLE SIMPLY 80= BECAUSE THE OPINION OR THE INFERENCE IS ADMITTED," AND YET, IF
81= SHE DOES TESTIFY IN THE ABSTRACT, WHICH SHE'S BEEN DOING, 82= WITHOUT REFERENCE TO ANY OF THE SPECIFIC DOCUMENTS UPON WHICH
83= SHE RELIES, THE COURT HAS GREAT DIFFICULTY UNDERSTANDING THE 84= BASIS FOR HER OPINIONS.
85= NOW, UNDER RULE 703, MS. SEE'S OPINION CAN BE 86= ADMITTED EVEN IF THE FACTS OR THE DATA THAT SHE RELIES UPON ARE
87= NOT ADMISSIBLE, AND UNDER RULE 705, THE EXPERT MAY TESTIFY 88= ABOUT HER OPINION WITHOUT FIRST TESTIFYING TO THE UNDERLYING
89= FACTS OR DATA, UNLESS THE COURT REQUIRES OTHERWISE. 90= AND THE COURT NEEDS MS. SEE TO TESTIFY ABOUT SOME OF
91= THE DOCUMENTS UPON WHICH SHE RELIED IN FORMING HER EXPERT 92= OPINION IN ORDER TO EVALUATE THE OPINION, AND THE COURT CAN, OF
93= COURSE, GIVE SUCH WEIGHT, IF ANY, TO THE OPINION AS IT DEEMS 94= PROPER.
95= SO I WILL PERMIT HER TO EXPLAIN HER OPINIONS BY 96= REFERENCE TO SPECIFIC DOCUMENTS IN ORDER TO ALLOW THE
97= PLAINTIFFS TO SHOW THE COURT THAT HER OPINION, QUOTE, QUOTING 98= FROM RULE 702, "IS BASED UPON SUFFICIENT FACTS AND DATA,"
99= UNQUOTE, AND QUOTE, "IS THE PRODUCT OF RELIABLE PRINCIPLES AND
100= METHODS," UNQUOTE. 101= HOWEVER, I WANT TO EMPHASIZE, THERE'S NO NEED FOR
102= MS. SEE TO TESTIFY AT LENGTH ABOUT LARGE NUMBERS OF DOCUMENTS, 103= AS LONG AS HER TESTIMONY SHOWS THE BASIS FOR HER EXPERT
104= OPINION, AND I PRESUME THAT THE PLAINTIFFS, OF COURSE, WILL 105= HAVE OTHER WITNESSES WHO WILL PROVIDE THE FOUNDATION FOR
106= ADMITTING THE DOCUMENTS THAT MS. SEE RELIES UPON INTO EVIDENCE. 107= SO I'M GOING TO PERMIT HER DIRECT TESTIMONY TO
108= CONTINUE, AND I THINK WE FINISHED THE CROSS-EXAMINATION ON 109= WHICH SHE TESTIFIED TO YESTERDAY, AND SO SHE CAN GO ON, FINISH
110= UP HER DIRECT TODAY, AND WE'LL HAVE CROSS-EXAMINATION ON THAT. 111= MS. SEE, WILL YOU PLEASE TAKE THE STAND.
112= MR. PETROCELLI: YOUR HONOR? 113= THE COURT: YES.
114= MR. PETROCELLI: JUST SO I DON'T HAVE TO INTERRUPT 115= THE EXAMINATION, I NOTICED IN THE NOTEBOOK THAT WAS HANDED OUT
116= TODAY, UNDER TAB 1, WHICH IS WHY I BRING IT UP NOW, THE 117= PLAINTIFFS' NOTEBOOK OF EXHIBITS, THE FIRST TAB INCLUDES A
118= NUMBER OF DOCUMENTS OF THE DEFENDANTS, OF BARNES & NOBLE, FOR 119= 1999 AND 2000, WHICH DOCUMENTS, YOUR HONOR, HAD BEEN PRODUCED
120= PRIOR TO MS. SEE'S REPORT AND TO HER DEPOSITION LAST YEAR, BUT 121= WHICH WERE NOT USED BY HER IN RENDERING HER REPORT, AND OF
122= COURSE, THE DOCUMENTS WERE NOT USED IN THE DEPOSITION OF 123= MS. SEE BECAUSE THEY WERE NOT PART OF HER WORK PRODUCT; AND
124= MS. PREOVOLOS CAN SPEAK TO THAT BECAUSE SHE HANDLED THE
125= DEPOSITION, AND WE'RE CONCERNED ABOUT NOW HER USING ADDITIONAL 126= DOCUMENTS THAT WE NEVER HAD ANY OPPORTUNITY TO QUESTION HER
127= ABOUT AT HER DEPOSITION. 128= THE COURT: WELL, I PRESUME THAT WON'T BE NECESSARY,
129= MR. SPIVA. 130= MR. SPIVA: YOUR HONOR, IF I MIGHT RESPOND, THE
131= DOCUMENTS HE REFERS TO CAME VERY LATE AFTER THE CLOSE OF 132= DISCOVERY, THEY WERE ELECTRONIC DOCUMENTS, AND THEY ARE THE
133= SAME TYPE, THOUGH, OF OTHER DOCUMENTS THAT MS. SEE DID IDENTIFY 134= IN HER REPORT.
135= THE COURT: THAT WON'T WORK. THE OTHER SIDE MUST 136= HAVE THE OPPORTUNITY TO EXAMINE HER WITH RESPECT TO THOSE
137= DOCUMENTS, ANYTHING THAT SHE USES IN HER REPORT OR ANYTHING 138= THAT SHE'S TESTIFYING HERE TO, AND THAT'S THE WHOLE POINT OF
139= HAVING THE EXPERT REPORT, SO SPECIFICALLY LAID OUT IN RULE 26. 2
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140= MR. SPIVA: ONE OTHER THING, YOUR HONOR. WE HAD 141= THESE ON THE LIST THAT WE PROVIDED THEM ON SATURDAY, AND THERE
142= WAS NO OBJECTION MADE. IT SEEMS LIKE THIS IS A WAIVED 143= ARGUMENT.
144= THE COURT: DO YOU WANT TO --145= MR. PETROCELLI: NO, YOUR HONOR, THAT'S ALL RIGHT.
146= WE GOT THIS GIGANTIC LIST OF DOCUMENTS AND WE WORKED ALL NIGHT 147= TO PREPARE FOR THEM AND NOW WE'RE DOWN TO, YOU KNOW,
148= SUBSTANTIALLY FEWER, AND THEY STAND OUT, AND I DON'T THINK IT'S 149= APPROPRIATE FOR THEM TO BE USING DOCUMENTS THAT WE HAVEN'T HAD

150= A CHANCE TO --151= THE COURT: DO YOU HAVE A QUESTION ABOUT THAT?
152= MR. DEBRUIN: IF I COULD JUST --I WANT TO MAKE SURE 153= THE COURT UNDERSTANDS. THESE WERE DOCUMENTS THAT BARNES &
154= NOBLE DIDN'T PRODUCE TO US. WE HAD BEEN FIGHTING FOR THESE 155= DOCUMENTS, YOUR HONOR, REPEATEDLY. WE HAD TO GO TO MR. THACHER
156= TO GET THESE DOCUMENTS. WE FINALLY GOT THEM, LITERALLY, AS THE 157= COURT KNOWS, YOU ALLOWED THEM TO TAKE DISCOVERY LAST WEEK. WE
158= FINALLY GOT THESE DOCUMENTS. ALL THEY ARE ARE THE MOST RECENT 159= VERSIONS OF THE SAME TERMS PROFILES THAT THEY HAD PRODUCED FOR
160= US IN THE HARD COPY PREVIOUSLY. THEY ARE THE SAME KINDS OF 161= DOCUMENTS SHE HAS REVIEWED, THAT THEY HAVE DEPOSED HER ABOUT.
162= WHAT THESE ARE, YOUR HONOR, ARE TERMS PROFILES. 163= THE COURT: MR. DEBRUIN, IF YOU'LL PARDON ME, I AM
164= NOT CLEAR THAT I MADE A RULING, BUT PRESIDENT JOHNSON USED TO 165= HAVE A FAVORITE EXPRESSION ABOUT, THAT DOG WON'T HUNT, AND I'M
166= SORRY THAT I MUST PUT YOUR ARGUMENT IN THE SAME CATEGORY. 167= MR. DEBRUIN: VERY WELL.
168= THE COURT: AND I HAVE RULED ON IT, AND SHE MAY NOT 169= TESTIFY WITH RESPECT TO THOSE DOCUMENTS. THAT'S A FUNDAMENTAL
170= PRINCIPLE IN THE TRIAL OF A LAWSUIT. 171= MR. SPIVA: VERY WELL, YOUR HONOR. WE WILL PROCEED
172= WITH THE DOCUMENTS THAT DON'T FALL INTO THAT CATEGORY, WHICH I, 173= JUST FOR MS. SEE'S BENEFIT --YOU MAY NOT KNOW ALL THE INS AND
174= OUTS OF THE DISCOVERY --THAT SHE SHOULD NOT TESTIFY REGARDING
175= THE DOCUMENTS IN TABS 1, 2, AND 3 AND 4. 176= GAIL S. SEE,
177= CALLED AS A WITNESS FOR THE PLAINTIFFS, HAVING BEEN PREVIOUSLY 178= DULY SWORN, TESTIFIED FURTHER AS FOLLOWS:
179= DIRECT EXAMINATION (RESUMED) 180= Q. GOOD MORNING, MS. SEE.
181= A. GOOD MORNING. 182= Q. AS AN EXPERT IN THE BOOKSELLING FIELD, HAVE YOU FORMED ANY
183= OPINION REGARDING THCould not acquire words on page 4 E DISCOUNT TERMS THAT DEFENDANTS HAVE 184= RECEIVED AND HOW THEY COMPARE TO STANDARD INDUSTRY TERMS, AS
185= YOU UNDERSTAND THEM, BASED ON YOUR 30 YEARS OF EXPERIENCE IN 186= THE BOOKSELLING FIELD?
187= A. I HAVE FORMED AN OPINION. 188= Q. WHAT IS THAT OPINION?
189= A. WELL, BASED ON MANY OF THE DOCUMENTS THAT I'VE SEEN --AND 190= I REVIEWED MANY DOCUMENTS IN THIS CATEGORY --I BELIEVE --MY
191= OPINION IS THAT THE DEFENDANTS RECEIVED TERMS THAT WERE VERY 192= DIFFERENT FROM THE ESTABLISHED STANDARD TERMS IN THE INDUSTRY.
193= THE COURT: YOU SEE, THIS IS THE VERY THING THAT --194= THE WITNESS: --THAT YOU DON'T WOULDN'T WANT.
195= THE COURT: --THAT I OBJECTED TO YESTERDAY. I 196= CAN'T UNDERSTAND IT. IT IS PULLING AN EXPERT OPINION OUT OF
197= THE CLOUDS. I DON'T KNOW WHAT SHE'S TALKING ABOUT --198= MR. SPIVA: JUST LAYING FOUNDATION.
199= THE COURT: DON'T INTERRUPT ME.
200= MR. SPIVA: I APOLOGIZE. 201= THE COURT: WHEN SHE'S GOING TO TESTIFY ON HER
202= OPINION, I WANT HER TO SAY THAT SHE'S EXAMINED --GIVEN THIS 203= VOLUMINOUS OPINION, WORLDWIDE OPINION, AND I WANT TO KNOW
204= PRECISELY WHAT SHE BASES IT ON, NOT JUST THAT, "I BASE IT ON A 205= LOT OF DEFENDANTS' DOCUMENTS" AND SO ON. THAT'S --WHEN I
206= SAY --TALK ABOUT THE TRIER OF THE FACT GIVING WITNESSES' 207= TESTIMONY SUCH WEIGHT, IF ANY, THAT I GIVE NO WEIGHT AT ALL TO,
208= AND I DON'T WANT TO SIT HERE ALL MORNING WHERE I DON'T GET 209= SOLID OPINION. 3
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280= DISTRIBUTION CENTER TO SOME OF THE EXECUTIVES, AND IT HAS 281= ATTACHED TO IT A LETTER FROM THIS WOMAN WHO'S AN INVENTORY
282= MANAGER TO AN EXECUTIVE AT AVON BOOKS, AND THE FIRST LINE 283= REFERS TO THE "DISTRIBUTION (SIC) DISCOUNT INCENTIVE PLAN."
284= NOW, IN THE TRADE --285= Q. PARDON ME, MS. SEE, DID YOU SAY "DISTRIBUTION DISCOUNT"?
286= A. DISTRIBUTOR, I'M SORRY, "DISTRIBUTOR DISCOUNT INCENTIVE 287= PLAN." AND IN THE TRADE, "DISTRIBUTOR" AND "WHOLESALER" ARE
288= USED ALMOST SYNONYMOUSLY, AND SO BASICALLY, MY OPINION WAS THAT 289= BARNES & NOBLE WAS RECEIVING A WHOLESALER INCENTIVE ON TOP OF
290= THEIR MORE ADVANTAGEOUS TERMS FOR THE RDC, RETAIL DISTRIBUTION 291= CENTER.
292= AND AGAIN, I THINK WE WENT OVER THIS YESTERDAY, THAT 293= WE DISCUSSED THE DIFFERENCE BETWEEN WHOLESALER DISCOUNTS AND
294= RETAILER DISCOUNTS. 295= Q. MS. SEE, ASIDE FROM THE AVON TERMS PROFILE THAT YOU HAVE
296= DISCUSSED, WERE THERE OTHER --ANY OTHER INSTANCES BESIDES AVON 297= OF DISCOUNTS THAT YOU FOUND THAT BARNES & NOBLE RECEIVED THAT
298= WERE MORE FAVORABLE THAN STANDARD INDUSTRY TERMS? 299= A. I FOUND MANY INSTANCES, AND I DID THE SAME EXERCISE. I

300= TOOK THE TERMS PROFILES THAT I WAS REVIEWING AND I LOOKED AT 301= THE RED BOOK AND I COMPARED THE TWO, AND THAT'S WHERE MY --I
302= BASED MY OPINION ON THOSE FACTS, AND AS I SAY, THIS IS VERY 303= DIFFERENT FROM ANYTHING THAT IS STANDARD INDUSTRY PRACTICE.
304= Q. OKAY. MS. SEE, NOW, WHY DON'T WE TURN TO THE THING THAT I 305= STARTED TO JUMP AHEAD ON, WHICH IS, BASED YOUR EXPERIENCE, HAVE
306= YOU FORMED AN OPINION ABOUT WHETHER BORDERS RECEIVES RDC 307= DISCOUNTS ON CONDITIONS WHICH DIFFER FROM STANDARD INDUSTRY
308= TERMS, AND IF SO, WHAT ARE THE FACTS OR THE DATA UPON WHICH YOU 309= BASE YOUR OPINION?
310= A. WELL, FIRST OF ALL, MY OPINION IS THAT, YES, THEY DID 311= RECEIVE --THEY RECEIVED, AGAIN, PURCHASES WITHOUT MEETING THE
312= STANDARD PUBLISHED TERMS. THIS REFERS TO THE RETAIL 313= DISTRIBUTION CENTER, AND YESTERDAY WE SPENT A LOT OF TIME
314= TALKING GENERALLY ABOUT RETAIL DISTRIBUTION CENTERS, AND THE 315= REQUIREMENTS THAT A BOOKSTORE HAS TO MEET IN ORDER TO QUALIFY
316= FOR A RETAIL DISTRIBUTION CENTER DISCOUNT, AND ONE OF THE --317= ONE OF THOSE REQUIREMENTS WAS CARTON QUANTITY, AND I EXPLAINED
318= THAT A CARTON IS A BOX WITH --FILLED WITH THE SAME TITLE. SO 319= WHEN YOU GET A CARTON, ALL BOOKS IN THERE ARE THE SAME. AND WE
320= EXPLAINED THAT THAT'S DIFFICULT FOR SOME BOOKSTORES TO MEET 321= THAT REQUIREMENT.
322= IF YOU WILL NOW TURN TO TAB 8 --323= Q. FOR THE RECORD, MS. SEE, WHAT EXHIBIT NUMBER --
324= A. I WAS JUST GOING TO SAY, EXHIBIT 1206. THIS IS A LETTER
325= FROM THE VICE PRESIDENT OF MERCHANDISING AT BORDERS TO STEVE 326= LEWERS AT HOUGHTON MIFFLIN, AND THE FIRST HIGHLIGHTED PARAGRAPH
327= REFERS TO "CARTON QUANTITY RESTRICTIONS." 328= AND THE GIST OF THIS PARAGRAPH IS THAT ROBIN WAGNER
329= IS TELLING THE SALES MANAGER AT HOUGHTON MIFFLIN THAT, IF YOU 330= LOOK AT THE BOTTOM OF THAT PARAGRAPH, LAST FOUR LINES, "ALL
331= MAJOR PUBLISHERS, INCLUDING RANDOM HOUSE, SIMON & SCHUSTER, 332= LITTLE BROWN, HAVE RECOGNIZED THAT SUCH RESTRICTIONS,"
333=" RESTRICTIONS" MEANING BUYING IN CARTON QUANTITIES, "ARE 334= ANATHEMA TO OUCould not acquire words on page 6 R EFFICIENT ORDERING PRACTICES," AND THESE
335= PUBLISHERS HAVE BEEN FLEXIBLE ON THIS ISSUE. 336= AGAIN, THIS IS VERY UNUSUAL, BECAUSE THE CARTON
337= QUANTITY REQUIREMENT IS ALMOST ALWAYS PART OF WHAT YOU HAVE TO 338= HAVE TO QUALIFY FOR THESE RETAIL DISTRIBUTION CENTER DISCOUNTS,
339= WHICH ARE MUCH HIGHER THAN --ALMOST ALWAYS MUCH HIGHER THAN 340= THE PUBLISHED STANDARD DISCOUNTS.
341= Q. MS. SEE, DOES THE DOCUMENT GO ON TO SAY THOSE PUBLISHERS 342= HAVE WAIVED THE CARTON QUANTITY REQUIREMENT FOR BORDERS?
343= A. YES. 344= Q. LET ME ASK YOU ANOTHER QUESTION ABOUT THAT DOCUMENT. AS
345= YOU POINTED OUT, IT SAYS THAT CARTON QUANTITY ORDERING IS 346= ANATHEMA TO BORDERS' INVENTORY MANAGEMENT. IN YOUR OPINION AS
347= AN EXPERT --348= MR. STEER: OBJECTION, MISCHARACTERIZES THE
349= DOCUMENT, YOUR HONOR. 5
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421= THE TOP OF THAT PAGE --IT'S HARD TO READ, BECAUSE EVERYTHING 422= IS SMALL PRINT --THE TOP OF THAT PAGE, STARTING WITH THE
423= SECOND ENTRY UNDER THE THIRD COLUMN IN, IT SAYS, "VENDOR NAME," 424= AND THERE ARE THREE ENTRIES --THERE ARE FOUR ENTRIES UNDER

425= THAT, BANTAM, DOUBLEDAY, DELL. I'M REFERRING TO THE FIRST 426= THREE OF THOSE FOUR. AND IT SAYS, IN THE NEXT COLUMN, "BDB,"
427= AND THAT REFERS TO BARNES & NOBLE. 428= Q. HOW DO YOU KNOW THAT, MS. SEE?
429= A. BECAUSE I READ TESTIMONY FROM --I THINK IT WAS PATRICIA 430= BOSTELMAN IN HER DEPOSITION THAT BARNES & NOBLE --THIS REALLY
431= WAS B. DALTON BOOKSELLERS, BUT IT MEANT BARNES & NOBLE. 432= AND THEN YOU GO ACROSS UNDER THE COLUMN HEADED
433=" NEGOTIATED STOCK," IT SAYS, "4 PERCENT OFF NET DATING. AND 434= THEN, TO MAKE THE COMPARISON --AND THE REASON I CAME TO THIS
435= OPINION IS THAT IN THOSE COLUMNS YOU WILL SEE, IF YOU GO DOWN 436= UNDER THE "OFFER TYPE" IN THE COLUMN, YOU'LL SEE OTHER ENTRIES
437= THAT SAY "BDB," MEANING BARNES & NOBLE, AND "IND," MEANING 438= INDUSTRY-WIDE. SO THOSE WERE STOCK OFFERS THAT WERE OFFERED TO
439= EVERYONE IN THE INDUSTRY, AND THERE ARE OTHER EXAMPLES. 440= THERE'S, AT THE BOTTOM OF THAT PAGE, AND THE TOP OF
441= THE NEXT PAGE, THERE ARE TWO BDB, BARNES & NOBLE-ONLY STOCK 442= OFFERS FROM INGRAM, ADDITIONAL 1 PERCENT DISCOUNTS, AND THEN
443= FINALLY, ON THE NEXT PAGE, PAGE 24, ABOUT --JUST NOT QUITE 444= HALFWAY DOWN, THERE IS AN ENTRY FOR PENGUIN, AGAIN, BDB,
445= MEANING BARNES & NOBLE, STOCK OFFER, ADDITIONAL 2 PERCENT. 446= NOW, FIRST OF ALL, THEY'RE BEING OFFERED DEALS,
447= SPECIAL DEALS, STOCK OFFERS, NOT GENERALLY AVAILABLE. 448= Q. MS. SEE, DID YOU IDENTIFY ANYTHING ON PAGE 25 IN THAT
449= REGARD?
450= A. I WAS JUST --25, PAGE 25. THERE WAS ANOTHER PENGUIN STOCK 451= OFFER.
452= Q. I'LL TELL YOU WHAT. IT IS SMALL PRINT AND I THINK YOU'VE 453= EXPLAINED WHAT --HOW TO READ IT. LET ME ASK YOU, MS. SEE, WAS
454= THIS THE ONLY ACCOUNTS PAYABLE REPORT FROM 1994 THAT YOU 455= REVIEWED IN FORMING YOUR OPINION?
456= A. NO, I REVIEWED OTHER ACCOUNTS PAYABLE REPORTS, BUT THIS WAS 457= ONE --THIS IS TYPICAL OF WHAT I FOUND IN THE ACCOUNTS PAYABLE
458= REPORT, AND AGAIN, THESE WERE SPECIAL OFFERS OFFERED TO BARNES 459=& NOBLE, AND OTHERS THAT WERE INDICATED THAT WERE OFFERED TO
460= BOTH BARNES & NOBLE AND THE INDUSTRY. 461= Q. OTHER THAN THE ACCOUNTS PAYABLE REPORT EXAMPLE, WERE THERE
462= OTHER FACTS OR DATA THAT YOU RELIED UPON IN FORMING YOUR 463= OPINION THAT THE DEFENDANTS RECEIVED STOCK OFFERS NOT GENERALLY
464= AVAILABLE? 465= A. THERE WERE OTHER DOCUMENTS THAT I REVIEWED. IN MANY OF THE
466= DEPOSITIONS THEY TALKED ABOUT THIS KIND OF SPECIAL. 467= Q. ARE THERE ANY OTHER DOCUMENTS THAT YOU HAVE WITH YOU HERE
468= TODAY THAT YOU CAN TELL THE JUDGE ABOUT? 469= A. I HAVE TO SEE. JUST A MOMENT. I'M SORRY.
470= Q. TAKE YOUR TIME. TAKE YOUR TIME. 471= A. I AM.
472= Q. JUST TO REFRESH YOUR RECOLLECTION, I WOULD ASK YOU TO TURN 473= TO TAB 12, THE LAST PAGE.
474= A. THE LAST PAGE ON TAB 12. NOW, ON TAB 12, THE LAST PAGE,
475= WHICH IS EXHIBIT 945, AND ON PAGE 14, WE TOUCHED ON THIS 476= YESTERDAY, ABOUT THE BANTAM, DOUBLEDAY, DELL FLEX STOCK OFFER,
477= AND THIS WAS AN UNUSUAL OFFER, AS I MENTIONED YESTERDAY. THIS 478= WAS AN OFFER THAT ACTUALLY EXTENDED FOR ONE YEAR, AND IN THIS
479= INSTANCE, THIS IS A DOCUMENT THAT SHOWED ME, AGAIN, THAT BARNES 480=& NOBLE WAS CREATING TERMS OUTSIDE OF THE STANDARD PUBLISHED
481= TERMS, BECAUSE IN THE SECOND LINE IT SAYS, "AN ACCOUNT CAN 482= PLACE UP TO FOUR ORDERS," OVER THIS YEAR-LONG PERIOD, AND IN
483= HANDWRITING --484= Q. EXCUSE ME. LET ME JUST ASK YOU, IS THE PRINTED PART OF
485= THIS, DOES THAT --486= A. YES.
487= Q. WHAT DOES THAT REPRESENT? 488= A. THE PRINTED PART REPRESENTS A STANDARD BANTAM DOUBLEDAY
489= FLEX STOCK OFFER THAT IS DISTRIBUTED, PUBLISHED, FOR EVERYBODY. 490= SO IT'S EITHER GIVEN, AS WE SAID YESTERDAY, BY THE SALES REP 7
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491= THROUGH THE MAIL, PUBLISHED IN PUBLISHER'S WEEKLY, BUT IT'S 492= GENERALLY AVAILABLE, AND THIS ONE IS OBVIOUSLY FROM BARNES &
493= NOBLE, AND IT'S SIGNED BY THAT PATRICIA BOSTELMAN. 494= Q. AND CAN YOU DESCRIBE GENERALLY THE STANDARD OFFER IN THE
495= PRINTED FORM? 496= A. THE STANDARD OFFER SAYS YOU CAN PLACE UP TO FOUR ORDERS OF
497= A CERTAIN NUMBER OF BOOKS, 200 BOOKS PER ORDER, AND IT SAYS, 498= BETWEEN JULY 1, 1997 AND JUNE 30TH, 1998. AND WHAT MAKES
499= THIS --WHAT LED ME TO BELIEVE, AGAIN, THAT WHAT BARNES & NOBLE
500= IS RECEIVING IS VERY MUCH OUT OF THE ORDINARY WAS THE 501= HANDWRITTEN NOTE, "FIVE PURCHASE ORDERS OVER FOUR WEEKS PER
502= OFFER," AND THAT IS WELL BEYOND THE TERMS OF THE PUBLISHED 503= OFFER.
504= Q. DID YOU REVIEW ANYTHING ELSE THAT PROVIDED YOU WITH 505= CONFIRMATION OF YOUR OPINION IN THAT REGARD?
506= A. YES. THERE WAS TESTIMONY THAT THIS WAS NECESSARY FOR THEM 507= TO USE IN ORDER TO KEEP THEIR INVENTORY IN THEIR --TO MANAGE
508= THEIR INVENTORY. AND ANYBODY WOULD LIKE TO BE ABLE TO DO THAT, 509= BUT THIS IS VERY UNUSUAL.
510= Q. SO MS. SEE, COULD YOU EXPLAIN HOW MANY OFFERS OR ORDERS 511= BARNES & NOBLE IS BEING PERMITTED TO PLACE PURSUANT TO THE
512= STOCK OFFER? 513= A. RIGHT. WELL, RATHER THAN BEING ABLE TO PLACE THE FOUR
514= ORDERS THAT THE STOCK OFFER UNDER THE --AS DEFINED UNDER THE 515= PUBLISHED STOCK OFFER, THEY'RE OBVIOUSLY GOING TO BE ABLE TO
516= PLACE 20 ORDERS. 517= Q. AND HAVE YOU READ TESTIMONY IN ADDITION TO REVIEWING THIS
518= DOCUMENT THAT SUGGESTS THAT THEY WERE ABLE TO EXTEND THE TIME 519= WINDOWS BY PLACING THEM OVER THE FOUR WEEKS?
520= A. CORRECT, I DID. I READ THE DEPOSITION TESTIMONY, AND AS I 521= SAY, THIS IS, TO ME, A DISCRIMINATORY PRACTICE BECAUSE THIS WAS
522= NOT AVAILABLE, AND THIS RELATES TO WHAT WE WERE TALKING ABOUT 523= YESTERDAY WITH YOUR INVENTORY MANAGEMENT. IT GIVES YOU A
524= TREMENDOUS ADVANTAGE. INSTEAD OF TAKING ALL YOUR BOOKS IN FOUR
525= ORDERS, HAVING TO HAVE THEM IN YOUR INVENTORY, PAY FOR THEM ALL 526= AT ONE TIME, YOU SPREAD THOSE ORDERS OUT.
527= Q. LET ME TURN TO A DIFFERENT TOPIC, MS. SEE. I WANT TO ASK 528= YOU ABOUT SHORTAGE ALLOWANCES AND DAMAGE ALLOWANCES, AND
529= SPECIFICALLY STATISTICAL RESERVES, OR R. O. G. ALLOWANCES, AS THE 530= DEFENDANTS REFER TO THEM.
531= BASED ON YOUR EXPERIENCE, HAVE YOU FORMED AN OPINION 532= ABOUT WHETHER THE DEFENDANTS HAVE RECEIVED SHORTAGE AND DAMAGE
533= ALLOWANCES ON TERMS THAT DIFFER FROM STANDARD INDUSTRY TERMS, 534= AND IF SO, WOULD YOU PROCEED TO INFORM THE COURT WHAT THE FACTS
535= OR DATA ARE UPON WHICH YOU BASE YOUR OPINION? 536= A. YES, I HAVE AN OPINION THAT THEY DID RECEIVE STATISTICAL
537= RESERVES, AND WE TALKED ABOUT THIS YESTERDAY WHEN WE WERE 538= TALKING ABOUT SHORTAGES AND BOOKS COMING IN AND THE TIME IT
539= TAKES TO MAKE CERTAIN THAT THE BOOKS YOU'VE RECEIVED MATCH THE 540= BOOKS YOU'VE BEEN INVOICED FOR, AND THIS IS VERY IMPORTANT,
541= BECAUSE OTHERWISE, YOU END UP PAYING FOR BOOKS YOU DIDN'T GET. 542= YOU MAY HAVE DAMAGED BOOKS AND OTHER THINGS.
543= BARNES & NOBLE, ACCORDING TO THE DOCUMENTS THAT I 544= HAVE READ, HAS MADE AN ARRANGEMENT WITH THE PUBLISHERS WHERE
545= THEY TAKE SOMETHING CALLED A STATISTICAL RESERVE, AND I'D LIKE 546= TO REFER YOU BACK TO THE AVON TERMS PROFILE WITH BARNES &
547= NOBLE, BECAUSE --548= Q. WHAT TAB IS THAT UNDER, MS. SEE?
549= A. I'M SORRY, IT'S TAB 5, IS THE TERMS PROFILE WE LOOKED AT IN
550= THE VERY BEGINNING, AND THAT HAD A STATISTICAL RESERVE, SECOND 551= FROM THE LAST. IT HAD A STATISTICAL RESERVE LINE. I JUST
552= WANTED TO NOTE THAT. 553= Q. WHAT IS A STATISTICAL RESERVE?
554= A. THE STATISTICAL RESERVE IS A PERCENTAGE THAT BARNES & NOBLE 555= HAS --TAKES ON THEIR INVOICES TO MAKE UP FOR THESE SHORTAGES,
556= DAMAGED BOOKS, AND ANYTHING SUCH AS THAT. AND SO IT'S A 557= TREMENDOUS ADVANTAGE, BECAUSE YOU HAVE, RIGHT OFF YOUR INVOICE,
558= YOU TAKE THIS, IN THE AVON INSTANCE, 1.1 PERCENT. SO YOU DON'T 559= HAVE TO GO THROUGH THE TIME OF FIGURING OUT, WELL, HOW MANY
560= BOOKS YOU WERE SHORTED OR HOW MANY BOOKS WERE DAMAGED. 8
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561= AND THEN --562= Q. MS. SEE --GO AHEAD.
563= A. AND THEN, EXCUSE ME, I JUST WANT TO GO BACK TO TAB 3, AND 564= THIS IS A --
565= Q. JUST FOR THE RECORD, MS. SEE, THAT'S PLAINTIFF'S EXHIBIT 566= 824?
567= A. 824. AND THIS IS, AS YOU CAN SEE AT THE TOP, THIS IS A 568= DOCUMENT THAT I REFERRED TO, AND IT WAS ONE OF THE REASONS I
569= CAME TO THE OPINION THAT BARNES & NOBLE WAS OBVIOUSLY GETTING 570= THE STATISTICAL RESERVES, BECAUSE IT'S A DOCUMENT THAT, AMONG
571= OTHER THINGS, IN THE FOURTH COLUMN AT THE TOP, IT HAS A 572= NOTATION, A HEADER, AND IT SAYS, "STATISTICAL RESERVES," AND
573= THESE, BY THE WAY, ARE THE TOP 50 VENDORS, THE TOP 50 VENDORS 574= FROM WHOM BARNES & NOBLE BUYS BOOKS, AND AS YOU NOTE, THE

575= STATISTICAL RESERVES, GOING DOWN THAT COLUMN, RANGE FROM 1.5 --576= THEY RANGE UP AND DOWN --EXCUSE ME --THEY RANGE FROM 1.5 TO
577=. 3, .7. THEY ARE DIFFERENT STATISTICAL RESERVES FOR THEIR 578= DIFFERENT VENDORS.
579= Q. NOW, MS. SEE, DO THESE STATISTICAL RESERVES, IN YOUR 580= OPINION, MERELY COMPENSATE BARNES & NOBLE FOR THE ACTUAL
581= SHORTAGES AND DAMAGES THAT IT HAS FROM PUBLISHERS, AND IF NOT, 582= CAN YOU TELL THE BASIS FOR YOUR OPINION?
583= A. YES. IN MY EXAMINATION OF THE DOCUMENTS, IT'S MY OPINION 584= THAT THESE STATISTICAL RESERVES ARE NOT BASED IN FACT, AND IF
585= YOU WOULD --AND AS YOU NOTED ON THE CHARTS THAT WE JUST LOOKED 586= AT, THE STATISTICAL RESERVES ARE NOT CONSISTENT. THEY'RE
587= DIFFERENT FOR DIFFERENT VENDORS. AND IF YOU WILL LOOK AT 588= TAB --UNDER TAB 14, EXHIBIT 967, AT THE BOTTOM OF --THESE ARE
589= E-MAILS, AND THIS PARTICULAR E-MAIL, THE SECOND ON THIS PAGE 590= FROM --
591= Q. PARDON ME, MS. SEE, WHOSE E-MAILS ARE THESE? 592= A. I WAS GOING TO SAY, THIS IS FROM PATRICIA BOSTELMAN TO
593= DAVID CULLY, WHO AT THAT POINT IS PRESIDENT OF THE RANDOM --594= EXCUSE ME --BARNES & NOBLE DISTRIBUTION CENTER. IN THAT
595= E-MAIL --596= THE COURT: I'M SORRY, WHICH TAB IS IT?
597= THE WITNESS: IT'S TAB 14. TAB 14. 598= MR. SPIVA: THIS IS PLAINTIFF'S 967, YOUR HONOR.
599= THE WITNESS: AND IN THIS E-MAIL FROM PATRICIA
600= BOSTELMAN TO DAVID CULLY, SHE SAYS, IN THE FOURTH LINE DOWN --601= SHE'S REFERRING TO THE MACMILLAN STATISTICAL RESERVE, AND AN
602= EXECUTIVE FROM MACMILLAN HAS OBVIOUSLY ASKED TO HAVE THE 603= STATISTICAL RESERVE REDUCED, AND SHE RESPONDS THAT, "I DO
604= BELIEVE THAT THE 1.5 PERCENT IS TOO HIGH AT THIS POINT, 605= ALTHOUGH I WOULDN'T TELL HIM," AND THAT INDICATES TO ME THAT
606= THEY KNEW THAT THE STATISTICAL RESERVES WERE ARBITRARY. 607= AND THEN THE OTHER --AMONG THE OTHER DOCUMENTS THAT
608= I LOOKED AT, IF YOU WOULD TURN TO TAB 15, THIS IS PLAINTIFF 609= EXHIBIT 952, AND ON THIS --IN THIS EXHIBIT, I WANT TO REFER TO
610= THE SECOND E-MAIL, FROM RICHARD RODD, AND THERE ARE TWO THINGS 611= IN HERE.
612= HE AGAIN --EXCUSE ME. HE HERE IS AGAIN TALKING 613= ABOUT THE STATISTICAL RESERVE PERCENTAGE. AS YOU SEE IN THE
614= THIRD LINE, IT SAYS --WE'RE TALKING ABOUT STATISTICAL RESERVE 615= PERCENTAGES, AND THEN ABOUT HALFWAY DOWN THAT PARAGRAPH, THERE
616= IS A LINE THAT BEGINS, "THE BOOK --" THAT SAYS, "THE BOOK 617= PUBLISHERS' PERCENTAGES ARE NOT CURRENTLY FACT-BASED." AND IT
618= WAS UPON THIS DOCUMENT THAT I CAME TO THE OPINION THAT THESE 619= WERE ARBITRARY STATISTICAL RESERVES.
620= AND FROM MY EXPERIENCE IN THE INDUSTRY, THIS IS A 621= VERY, VERY IMPORTANT TERM THAT BARNES & NOBLE HAS BEEN ABLE TO
622= NEGOTIATE FROM THE PUBLISHERS. I REMEMBER WHEN WE WERE WORKING 623= WITH THE PUBLISHER PLANNING COMMITTEE WITH THE AMERICAN
624= BOOKSELLERS ASSOCIATION, I MENTIONED YESTERDAY, AND ONE OF --
625= WHEN WE WOULD TALK TO PUBLISHERS, WE WERE TALKING ABOUT 626= POLICIES AND PRACTICES IN THE INDUSTRY AND TRYING TO MAKE IT
627= BETTER FOR EVERYBODY, AND THIS WAS ONE OF THE SUBJECTS THAT WE 628= DISCUSSED, AND WE WERE SUGGESTING THAT PUBLISHERS COULD GO THIS
629= ROUTE, BECAUSE IT WOULD SAVE EVERYBODY. IT WOULD SAVE THE 630= PUBLISHERS ALL OF THE DIFFICULTY OF THE PAPERWORK. IT WOULD 9
9 Page 10 11
631= CERTAINLY SAVE THE BOOKSELLERS. 632= SO THIS WAS SOMETHING THAT REALLY STRUCK ME, BECAUSE
633= I REMEMBERED HOW MUCH WE HAD HOPED TO BE ABLE TO ACHIEVE THIS, 634= FOR ALL BOOKSELLERS.
635= (CONTINUED ON FOLLOWING LINE. NOTHING OMITTED.) 636=
637= 638=
639= 640=
641= 642=
643= 644=
645= 646=
647= 648=
649=
650= BY MR. SPIVA: 651= Q. DID THE PUBLISHERS PROVIDE THAT IN RESPONSE --
652= A. WELL, WE WERE --653= Q. --QUESTION?
654= A. --SOMEHOW NEVER ABLE TO PERSUADE THEM. 655= Q. NO, HAVE YOU SEEN --GO AHEAD.
656= A. EXCUSE ME. IT HAS NOT BECOME INDUSTRY STANDARD. 657= Q. HAVE YOU SEEN ANY PUBLISHED --
658= LET ME ASK QUESTION AGAIN. HAVE YOU SEEN ANY 659= PUBLISHED STATISTICAL RESERVE OR SHORTAGE ALLOWANCE --
660= ALLOWANCES OR DAMAGE ALLOWANCES? 661= A. NO. I HAVE NOT.
662= Q. HAS ST. MARTINS? 663= A. OH, WAIT A MINUTE. YOU'RE RIGHT. I'M SORRY. ST. MARTINS
664= PRESS IS --DOES HAVE A STATISTICAL RESERVE NOW, BUT IT IS NOT 665= AN INDUSTRY-WIDE PRACTICE. STANDARD PRACTICE --
666= Q. OTHER THAN ST. MARTINS, ARE YOU AWARE OF ANY OTHER 667= PUBLISHER --
668= A. NO. 669= Q. --STATISTICAL RESERVE?
670= A. NO, I AM NOT. 671= Q. I KNOW ICould not acquire words on page 11 T'S DIFFICULT. JUST TRY TO WAIT FOR THE WHOLE
672= QUESTION GETS OUT, JUST FOR THE COURT REPORTER'S SAKE. 673= MISS SEE, YOU DISCUSSED BARNES & NOBLE'S STATISTICAL
674= RESERVE. DOES BORDERS AND WALDEN HAVE A SIMILAR PROGRAM OR
675= ALLOWANCE? 676= A. YES, BORDERS AND WALDEN HAVE A PROGRAM CALLED RECEIPT OF
677= GOODS, ROG, WHICH IS STRUCTURED THE SAME WAY. 678= Q. WANT TO ASK YOU JUST A FEW MORE QUESTIONS, MISS SEE, AND I
679= WANT TO ASK YOU ON THE SUBJECT OF INGRAM BOOK COMPANY. YOU 680= DISCUSSED THAT SOME YESTERDAY.
681= AND, AGAIN, I'D LIKE TO ASK YOU BASED ON YOUR 682= EXPERIENCE, YOU HAVE FORMED AN OPINION ABOUT WHETHER THE
683= DEFENDANTS HAVE RECEIVED DISCOUNTS AND OTHER TERMS FROM INGRAM 684= BOOK COMPANY THAT ARE NOT AVAILABLE ON THEIR STANDARD
685= INDUSTRY-WIDE TERMS, AND IF SO, IF YOU COULD PROCEED TO THE 686= FACTS AND DATA UPON WHICH YOU BASE THAT OPINION.
687= A. WELL, I HAVE FORMED AN OPINION THAT HERE, ONCE AGAIN, THE 688= DEFENDANTS WERE RECEIVING TERMS THAT WERE VERY DIFFERENT FROM
689= THE INDUSTRY STANDARD --STANDARD TERMS. 690= AND IF YOU --IF YOU'LL TURN TO --I'M GOING TO BE
691= REFERRING TO TABS 16 AND 17. THE FIRST TAB, 16, IS THE 1998 692= PUBLISHED --INGRAM PUBLISHED TERMS. AND ON THE SECOND PAGE OF
693= THIS, YOU'LL SEE ABOUT HALFWAY DOWN UNDER THEIR DISCOUNT 694= SCHEDULE --WE WENT OVER ALL THIS YESTERDAY. ONE COPY IS
695= 40 PERCENT AND FIVE COPIES IS 41 PERCENT, AND THAT MEANS FIVE 696= COPIES OF THE SAME TITLE.
697= AND IN ORDER --I ALSO KNOW FROM MY OWN EXPERIENCE 698= THAT IN ORDER TO RECEIVE THE FIVE COPIES AT 41 OR THE TEN COPIES
699= AT 42, YOU HAVE TO MEET A MINIMUM UNIT QUANTITY IN ORDER TO
700= QUALIFY. SO -- 10
10 Page 11 12

11 Page 12 13
772= DISCOUNT PURCHASES. 773= NOW, SHORT DISCOUNT PURCHASES ARE PURCHASE --BOOKS,
774= OFTEN TEXTBOOKS, UNIVERSITY PRESS BOOKS, SOME --BUT ANYWAY,
775= THEY ARE BOOKS THAT YOU PURCHASE --USUALLY A SHORT DISCOUNT IS 776= 20 PERCENT. AND HERE IT SAYS SHORT DISCOUNT PURCHASES ORDERED
777= ELECTRONICALLY WILL HAVE A 3 PERCENT INCENTIVE. 778= NOW, I'VE NEVER HEARD OF WHOLESALER INCENTIVES. I
779= KNOW INGRAM DOES OFFER SOMETHING CALLED REBATE DOLLARS BECAUSE 780= I'VE EXAMINED ALSO THE INGRAM BROCHURES THAT ARE SENT TO THE
781= BOOKSTORES, BUT THE REWARD DOLLARS ARE REALLY NOT DOLLARS. 782= THEY'RE CREDITS THAT THE BOOK STORE CAN USE AGAINST OTHER INGRAM
783= PURCHASES SUCH AS THEIR MICROFICHE OR THEIR CD-ROM OR SOMETHING 784= LIKE THAT, BUT THEY'RE NOT ACTUAL DOLLARS THAT THE BOOKSTORE
785= RECEIVES. 786= Q. CAN THEY USE THE REWARD DOLLARS TO BUY ADDITIONAL INGRAM
787= BOOKS? 788= A. NO, I WAS TRYING TO MAKE THAT CLEAR. IT IS NOT ANY KIND OF
789= A CREDIT AGAINST PURCHASES. SO IT DOESN'T INCREASE YOUR --790= THE COURT: I'M SORRY. I --I DON'T FOLLOW THAT.
791= THE WITNESS: OH, INCENTIVES? 792= THE COURT: YEAH.
793= THE WITNESS: ON PAGE --794= THE COURT: ARE YOU ON PAGE 6?
795= THE WITNESS: 8 --I'M SORRY. ON PAGE 8. 796= THE COURT: OH, YEAH.
797= THE WITNESS: YOU SEE THE 1 PERCENT ON THE THIRD --798= ON THE THIRD LINE.
799= THE COURT: YEAH.
800= THE WITNESS: AND ON THE SECOND PARAGRAPH, AN 801= ADDITIONAL 1 PERCENT, AND THEN 3 PERCENT.
802= THE COURT: ALL RIGHT. 803= BY MR. SPIVA:
804= Q. AND THAT INCENTIVE, THOUGH, ON PAGE 8, MISS SEE, THAT 805= INCENTIVE IS ACTUAL DOLLARS?
806= A. THAT --CORRECT. 807= Q. AND WAS THEIR INCENTIVE PUBLISHED IN RED BOOK IN 1998?
808= A. NO. NO. 809= Q. IN ANY OF THE TERMS PROFILES THAT YOU REVIEWED, WAS THERE AN
810= INCENTIVE PROGRAM? 811= A. YOU MEAN FOR BOOKS --GENERALLY PUBLISHED TERMS, NO. THAT'S
812= WHAT I WAS MAKING THE POINT WITH THE INGRAM BROCHURES THAT THEY 813= SEND TO BOOKSTORES.
814= Q. UM-HMM. 815= A. THEN, FINALLY, I WOULD LIKE TO TURN YOUR ATTENTION TO TAB
816= 18. 817= Q. OH, MISS SEE, BEFORE YOU TURN TO THAT, ARE THERE ANY OTHER
818= TERMS THAT BORDERS --819= A. OH.
820= Q. --RECEIVES THAT ARE NOT IN THE STANDARD INDUSTRY TERMS? 821= A. YES. I'M SORRY. THERE'S A VERY IMPORTANT TERM.
822= Q. THAT'S ALL RIGHT. TAKE YOUR TIME. 823= A. THERE'S ONE OTHER WAY THAT BORDERS WAS RECEIVING TERMS THAT
824= WERE DIFFERENT. WE TALKED YESTERDAY ABOUT RETURNS, YOU KNOW,
825= BOOKS BEING SENT BACK. 826= AND UNDER BORDERS' (SIC) PUBLISHED TERMS, IF YOU BUY
827= YOUR BOOK --THE STORE BUYS THE BOOK AT 41 PERCENT AND THEY SEND 828= THE BOOK BACK, THEY GET A 50 PERCENT CREDIT, THEREFORE THEY'VE
829= LOST 9 PERCENT. 830= AND ALSO IN INGRAM PUBLISHED TERMS --MAY HAVE SAID
831= BORDERS --IN THE INGRAM PUBLISHED TERMS, THERE'S A CAP THAT 832= MEANS THERE --I THINK IT'S 5 OR 10 PERCENT OF YOUR ANNUAL
833= PURCHASES AND YOU CAN RETURN BOOKS --NO MORE BOOKS THAN THAT. 834= SO THAT'S WHAT THE PUBLISHED TERMS ARE. THERE'S A PENALTY AND A
835= CAP. 836= WHEN YOU --
837= Q. IF YOU WANT TO REFRESH YOUR RECOLLECTION, IT'S ON PAGE 3? 838= A. 3.
839= Q. THE PARTICULAR BORDERS TERMS --840= A. RIGHT. AND NOW IF WE TURN BACK TO --AGAIN, THIS IS THE
841= BORDERS MEMORANDUM OF UNDERSTANDING WITH INGRAM. ON PAGE 3, 12
12 Page 13 14
842= THERE IS A HALFWAY DOWN, RETURNS CREDIT, AND YOU CAN SEE THAT 843= THEY CAN RETURN UP TO 5 PERCENT OF THE TOTAL YEAR'S --OF THE
844= TOTAL YEAR PURCHASES, AND THEY --THEY HAVE NO PENALTY. 845= UNDER THAT, THERE'S A VENDOR OF RECORD ENTRY, AND
846= THEY CAN RETURN 20 PERCENT OF THOSE TOTAL YEAR PURCHASES. SO 847= THEY GET THIS BENEFIT OF NO RETURNS PENALTY ON UP TO 5 PERCENT
848= OF THEIR PURCHASES. WHEREAS THE STANDARD PUBLISHED TERMS IS YOU 849= GET A PENALTY ON ANY BOOKS RETURNED, AND YOU CAN ONLY RETURN UP

850= TO 5 PERCENT. IT'S VERY COMPLICATED. I --851= Q. MISS SEE, I DON'T THINK YOU MENTIONED ANYTHING ABOUT PAYMENT
852= TERMS. IS THERE ANY WAY IN WHICH IN YOUR OPINION BORDERS HAS 853= RECEIVED PAYMENT TERMS WHICH DIFFER FROM INDUSTRY STANDARD
854= PAYMENT TERMS --855= A. YES.
856= Q. --FROM INGRAM? 857= A. YES. I ALSO BASE MY OPINION THAT BORDERS WAS RECEIVING
858= SPECIAL TERMS --I EXAMINED THE DOCUMENTS --859= Q. AND --EXCUSE ME.
860= A. --THEY --861= Q. I'M SORRY. I WANT TO REPHRASE THE QUESTION BECAUSE I SAID
862=" PAYMENT TERMS." 863= A. YES.
864= Q. WHAT I MEANT TO SAY, HAVE YOU FORMED AN OPINION BASED ON OF 865= WHETHER BORDERS HAS RECEIVED A CASH DISCOUNT WHICH IS NOT
866= AVAILABLE TO --ON THE INDUSTRY --867= A. RIGHT.
868= Q. --STANDARD TERMS. 869= A. WE DISCUSSED YESTERDAY THAT WITH INGRAM'S PUBLISHED TERMS,
870= YOU CAN TAKE A 2 PERCENT --YOU TAKE 2 PERCENT OFF OF YOUR 871= STATEMENT IF YOU PAY YOUR BILLS BY THE 10TH DAY OF THE MONTH.
872= AND UNDER THE BORDERS MEMORANDUM OF UNDERSTANDING, BORDERS WAS 873= ALLOWED TO TAKE THE 2 PERCENT IF THEY PAID BY THE 25TH DAY OF
874= THE MONTH, GIVING BORDERS 15 MORE DAYS BEFORE THEY HAD TO PAY.
875= Q. WHAT --IF A BOOKSTORE PURCHASING UNDER INDUSTRY STANDARD 876= TERMS PAID AT 25 DAYS EOM, WHAT CASH DISCOUNT WOULD THEY
877= RECEIVE? 878= A. THEY WOULD RECEIVE NO CASH DISCOUNT.
879= Q. OKAY. MISS SEE, HAVE YOU REVIEWED SIMILAR MOU'S FOR 880= BARNES & NOBLE?
881= A. YES, I HAVE. I'VE RECEIVED --I'VE REVIEWED MANY MOU'S FROM 882= I THINK THE EARLY '90'S ON.
883= Q. OKAY. AND DO THEY CONTAIN SUBSTANTIALLY THE SAME TERMS AS 884= THOSE THAT YOU REVIEWED --
885= A. YES. 886= Q. --FOR THE COURT.
887= A. IN THE EARLY DAYS, THEY HAD A WALDEN MOU AND A BORDERS, AND 888= THEN I THINK IT WAS IN '97, BORDERS AND WALDEN MERGED, AND SO AT
889= THAT POINT, THEY HAD ONE MOU. 890= Q. OKAY. SO YOU --
891= A. AND THE TERMS --EXCUSE ME. EXCUSE ME. 892= Q. SURE. EXCUSE ME.
893= A. THE TERMS WERE --THEY WENT ALONG WITH THE TERMS THAT I HAD 894= USED HERE AS AN EXAMPLE. I WAS JUST USING THESE TERMS AS AN
895= EXAMPLE TO SHOW YOU WHAT I BASED MY OPINION ON. 896= Q. THERE MAY HAVE BEEN SOME MINOR DIFFERENCES --
897= A. MINOR DIFFERENCES. 898= Q. OKAY.
899= A. BUT --
900= Q. NOW, YOU WERE TESTIFYING REGARDING BORDERS/ WALDEN, DID YOU 901= ALSO REVIEW MOU'S OF BARNES & NOBLE?
902= A. OH, YES. I ALSO REVIEWED THE MOU'S OF BARNES & NOBLE, AGAIN 903= FOR THE SAME TIME PERIOD.
904= Q. AND DID THEY SHOW THE SAME OR SUBSTANTIALLY THE SAME TERMS 905= THAT YOU'VE REVIEWED --
906= A. YES. 907= Q. --FOR THE COURT TODAY?
908= A. YES. THERE WERE SOME DIFFERENCES IN CAPS ON RETURNS AND 909= SOMETHING LIKE THAT. BUT IN GENERAL, THE TERMS WERE THE SAME.
910= AND --911= Q. FINALLY, REGARDING THE INCENTIVES THAT YOU TESTIFIED ABOUT 13
13 Page 14 15
912= REGARDING BORDERS, WAS THERE ANY OTHER FACT OR DATA THAT YOU 913= RELIED UPON IN REACHING YOUR CONCLUSION THAT THIS WAS SOMETHING
914= THAT WAS NOT MADE AVAILABLE TO THE INDUSTRY? 915= A. YES. AND IF YOU'LL TURN TO TAB 18, AND THIS IS PLAINTIFF'S
916= EXHIBIT 2470. 917= Q. OKAY.
918= A. AND THIS IS, AGAIN, COUPLE OF E-MAILS. AND I'D LIKE TO 919= REFER TO THE SECOND E-MAIL FROM JEFF BETHKE TO SOME OF THE
920= BARNES & NOBLE (SIC) EXECUTIVES. 921= Q. PARDON ME, MISS SEE. DID YOU SAY BARNES & NOBLE?
922= A. I MEANT BORDERS. I'M VERY SORRY. BORDERS. 923= Q. JUST SO THE RECORD IS CLEAR, CAN YOU SAY WHO THOSE
924= EXECUTIVES ARE FROM?
925= A. JEFF BETHKE AND EXECUTIVES FROM BORDERS. 926= AND THE SUBJECT IS --UNDER THE SUBJECT, "INGRAM
927= DISCOUNT." AND THE FIRST LINE OF THIS E-MAIL REFERS TO SUE 928= FLASTER, WHO IS WITH INGRAM. AND SHE HAS SAID THEY NEED TO GIVE
929= US THIS EXTRA POINT, THIS INCENTIVE "AS AN INCENTIVE BASED ON 930= VOLUME RATHER THAN AN UPFRONT DISCOUNT BECAUSE TO DO OTHERWISE
931= WOULD VIOLATE ROBINSON-PACTMAN (SIC) ACT." AND I THINK SHE 932= MEANS ROBINSON-PATMAN.
933= AND THAT IS A DOCUMENT THAT LED ME TO BELIEVE THAT 934= THEY UNDERSTOOD THAT THESE INCENTIVES WERE OUT OF THE ORDINARY,
935= TO SAY THE LEAST. AND --936= Q. MISS SEE, DOES THE DOCUMENT --DOES THE NEXT SENTENCE
937= FURTHER SUPPORT YOUR OPINION? 938= A. RIGHT. AND IT SAYS "WITH THIS UPFRONT DISCOUNT, THEY ARE
939= SELLING TO US," AND PRESUMABLY TO BARNES & NOBLE, "AT A RATE 940= DIFFERENT THAN THE RATE AT WHICH THEY SELL TO EVERY OTHER
941= BOOKSTORE IN THE COUNTRY." 942= MR. SPIVA: THANK YOU, MISS SEE. I HAVE NO FURTHER
943= QUESTIONS. 944= THE COURT: ALL RIGHT. I THINK WE'LL TAKE THE FIRST
945= MORNING BREAK NOW UNTIL 10: 00 O'CLOCK. 946= THE CLERK: ALL RISE.
947= (RECESS TAKEN AT 9: 42 A. M.) 948= (PROCEEDINGS RESUMED AT 10: 05 A. M.)
949= THE COURT: CROSS-EXAMINATION.
950= MR. WELSH: THANK YOU, YOUR HONOR. 951= THE COURT: MR. WELSH.
952= CROSS-EXAMINATION 953= MR. WELSH: THANK YOU, YOUR HONOR.
954= Q. GOOD MORNING, MISS SEE. 955= A. GOOD MORNING.
956= Q. NOW, YESTERDAY WHEN WE WERE TALKING, YOU MADE IT CLEAR THAT 957= YOUR EXPERIENCE AS A BOOKSELLER IS AS THE OPERATOR OF A --I
958= GUESS WHAT, BY TODAY'S TERMS, MIGHT BE CALLED A SMALL 959= SINGLE-STORE OPERATION, CORRECT?
960= A. YES. BUT WHEN YOU'RE OPERATING A SINGLE STORE, YOU ALSO 961= UNDERSTAND THE TERMS OF THE TRADE.
962= Q. NOW, WE'RE GOING TO GET INTO TALKING ABOUT THE TERMS OF THE 963= TRADE. BUT I JUST WANTED TO GET A LITTLE BIT MORE OF AN
964= UNDERSTANDING ABOUT YOUR BOOKSELLING EXPERIENCE, AND IT COMES 965= OUT OF YOUR OPERATION OF THE BOOKCASE, CORRECT?
966= A. IT DOES. BUT ALSO I'VE BEEN IN THIS BUSINESS FOR ALMOST 30 967= YEARS. I KNOW A LOT OF OTHER BOOKSELLERS, AND I --WE DISCUSS
968= THESE ISSUES. 969= Q. OKAY. I'M SURE THAT YOU HAVE LOTS OF CONVERSATIONS WITH
970= OTHER FOLKS. BUT I'M REALLY JUST FOCUSING RIGHT NOW ON YOUR 971= EXPERIENCE IN TERMS OF BEING A BOOKSELLER AS OPPOSED TO TALKING.
972= THE COURT: JUST ANSWER HIS QUESTIONS --973= THE WITNESS: THANK YOU.
974= THE COURT: --MS. SEE.
975= MR. WELSH: THANK YOU. I'D APPRECIATE THAT. 976= Q. AND YOUR EXPERIENCE IN TERMS OF THE --AS A BOOKSELLER NOW,
977= AS WE'RE FOCUSING ON, DOES NOT EXTEND TO LARGE NATIONAL 978= BOOKSELLING CHAINS, DOES IT? I MEAN --BY THAT QUESTION, I
979= MEAN, YOU'VE NOT WORKED FOR A LARGE NATIONAL BOOKSELLING CHAIN, 980= HAVE YOU?
981= A. NO, I'VE NOT WORKED FOR A LARGE -- 14
14 Page 15 16
982= Q. OKAY. 983= A. --NATIONAL BOOKSELLING CHAIN.
984= Q. AND AS A RESULT, YOU HAVE NO DIRECT PERSONAL EXPERIENCE OF 985= THE BOOKSELLING WORLD AS SEEN THROUGH THE EYES OF A LARGE
986= NATIONAL BOOKSELLING CHAIN, CORRECT? 987= A. THAT'S --THAT'S CORRECT.
988= Q. OKAY. AND, LIKEWISE, YOU'VE MADE IT CLEAR IN YOUR TESTIMONY 989= THAT OTHER THAN REVIEWING THE DOCUMENTS THAT YOU'VE BEEN
990= PROVIDED BY --BY COUNSEL, YOU'VE NOT GONE OUT AND SPOKEN TO, 991= FOR EXAMPLE, PUBLISHERS, CORRECT?
992= A. UM, CORRECT. I'VE NOT SPOKEN --993= Q. OKAY. YOU'VE CONDUCTED NO INDEPENDENT INVESTIGATION ON YOUR
994= OWN WITH REGARD TO THE OPINIONS THAT YOU FORMED AND THAT YOU'VE 995= TESTIFIED TO HERE TODAY, CORRECT?
996= A. HMM, THAT'S CORRECT. 997= Q. OKAY. SO, FOR EXAMPLE, YOU DON'T KNOW FROM ANY FIRSTHAND
998= EXPERIENCE WHAT THE WORLD LOOKS LIKE FROM THE PERSPECTIVE OF A 999= PUBLISHER WHO'S DEALING WITH A LARGE NATIONAL CHAIN, FOR

1000= EXAMPLE? 1001= A. WELL, I AM A PUBLISHER. I --
1002= Q. THAT'S TRUE. 1003= AND --WELL, YOU HAVE HAD ONE EXPERIENCE THAT YOU
1004= TESTIFIED TO IN YOUR DEPOSITION REGARDING DEALINGS WITH A LARGE 1005= NATIONAL CHAIN. DO YOU RECALL THAT, MS. SEE?
1006= A. YES, AS A PUBLISHER, I SPOKE TO THE BARNES & NOBLE --1007= Q. AND YOU ALSO TESTIFIED IN YOUR DEPOSITION THAT YOU HAD SOME
1008= DEALINGS WITH REGARD TO PROVIDING CO-OP TO BORDERS. DO YOU 1009= RECALL THAT?
1010= A. YES. YES. 1011= Q. IN FACT, RUMINATOR PRESS, THAT'S THE PRESS THAT YOU OWN,
1012= CORRECT? 1013= A. YES.
1014= Q. RUMINATOR PRESS DOESN'T HAVE A CO-OP POLICY, DOES IT? 1015= A. IT DOES NOT HAVE A WRITTEN CO-OP.
1016= Q. THAT'S RIGHT. AND THE BOOKS DISTRIBUTED BY RUMINATOR PRESS 1017= GO OUT UNDER --THROUGH A --CONSORTIUM, CORRECT?
1018= A. YES, THEY DO. 1019= Q. AND CONSORTIUM DOES NOT HAVE A PUBLISHED CO-OP TERMS,
1020= CORRECT? 1021= A. YES, THAT'S CORRECT.
1022= Q. YET YOU'VE TESTIFIED THAT YOU WERE CONSULTED AND YOU AGREED 1023= TO PROVIDE CO-OP FUNDS TO BORDERS, DESPITE THE FACT THAT NEITHER
1024= RUMINATOR PRESS NOR CONSORTIUM HAVE ANY PUBLISHED TERMS
1025= REGARDING THE PROVISION OF CO-OP, CORRECT? 1026= A. YES. WE DID THAT ON --
1027= Q. SO THAT WOULD BE ONE? 1028= MR. SPIVA: OBJECTION, YOUR HONOR, SHE HAD NOT Could not acquire words on page 16
1029= COMPLETED HER ANSWER. 1030= THE COURT: ALL RIGHT. HAVE YOU --WOULD YOU FINISH
1031= YOUR ANSWER. 1032= THE WITNESS: I WAS JUST SAYING THAT IT WAS AN
1033= EXPERIMENTAL CO-OP WHEN WE FIRST STARTED OUR BUSINESS. 1034= THE COURT: ALL RIGHT.
1035= BY MR. WELSH: 1036= Q. SO THAT WOULD BE ONE EXPERIENCE THAT YOU'VE HAD AS A
1037= PUBLISHER DEALING WITH A LARGE NATIONAL CHAIN, CORRECT? 1038= A. THAT IS ONE. I ALSO --
1039= Q. OKAY. 1040= A. --AS A PUBLISHER HAVE --
1041= Q. I WAS JUST --1042= MR. SPIVA: OBJECTION, YOUR HONOR. SHE HAS NOT
1043= FINISHED HER ANSWER. 1044= THE COURT: YES. DON'T YELL IN MY COURTROOM.
1045= MR. SPIVA: I APOLOGIZE, YOUR HONOR. 1046= THE WITNESS: MAY I FINISH MY ANSWER?
1047= THE COURT: YES. 1048= THE WITNESS: I HAD ALSO WORKED WITH BARNES & NOBLE
1049= ON MARKETING PLANS FOR RUMINATOR PRESS BOOKS AND FOR SMALL PRESS
1050= BOOKS. 1051= BY MR. WELSH: 15
15 Page 16 17

16 Page 17 18
1123= WANT TO TAKE THE MOST RECENT, THAT'S FINE, WHICH IS THE LAST 1124= ENTRY IN HERE.
1125= A. EXCUSE ME. 1126= Q. IT IS FOR THE ABA BOOK BUYER'S HANDBOOK FOR THE YEAR 2000.
1127= IT IS THE LAST PART OF --OF TAB 2, RIGHT BEFORE TAB 3. 1128= A. (REVIEWING DOCUMENTS.)
1129= Q. DO YOU HAVE THAT? 1130= A. I HAVE THAT.
1131= Q. AND IF YOU GO TO --IF YOU GO TO PAGE --WELL --THE LAST 1132= PAGE THAT'S COLLECTED HERE, I THINK IT BEARS PAGE 8, AND ON THE
1133= TOP, IT SAYS FOR "ABA MEMBERS ONLY." 1134= A. YES. I --THAT PAGE.
1135= Q. ALL RIGHT. AND IF YOU LOOK DOWN TO THE SECOND PARAGRAPH 1136= UNDER "FOR ABA MEMBERS ONLY," DO YOU SEE IT SAYS "THE ABA BOOK
1137= BUYERS HANDBOOK IS FOR ABA MEMBERS ONLY. WE DO NOT SELL, LEND 1138= OR GIVE IT TO NON-MEMBERS UNDER ANY CIRCUMSTANCES, NOR MAKE
1139= ANYONE ELSE DO SO. THE HANDBOOK IS NOT FOR RESALE. ADDITIONAL 1140= COPIES ARE AVAILABLE TO ABA MEMBERS FOR $75 EACH."
1141= SEE THAT? 1142= A. I DO.
1143= Q. OKAY. AND YOU UNDERSTAND THAT TO BE THE TERMS AND POLICIES 1144= GOVERNING THE ABA HANDBOOK, CORRECT?
1145= A. YES. 1146= Q. OKAY.
1147= NOW, YOU'RE AWARE, ARE YOU NOT, MISS SEE, THAT THERE 1148= ARE A NUMBER OF LARGE NATIONAL BOOKSELLERS BESIDES BARNES &
1149= NOBLE AND BORDERS, CORRECT?
1150= A. I AM AWARE OF THAT. THEY'RE NOT AS MANY AS THERE USED TO 1151= BE.
1152= Q. THERE'S --THERE'S BOOKS-A-MILLION, FOR EXAMPLE? 1153= A. CORRECT.
1154= Q. OKAY. BUT FIRST BEFORE WE GO ON TO THOSE, DO YOU HAVE AN 1155= UNDERSTANDING AS TO WHETHER BARNES & NOBLE OR BORDERS ARE
1156= MEMBERS OF THE ABA? 1157= A. THEY ARE NOT MEMBERS, NO.
1158= Q. THAT'S CORRECT. AND, THEREFORE, THEY'RE NOT ENTITLED TO A 1159= COPY OF THE ABA HANDBOOK NOT BEING MEMBERS UNDER THE TERMS AS
1160= SET FORTH --THAT WE JUST READ, CORRECT? 1161= A. YES, IT IS. AND IT PUZZLES ME BECAUSE IN ONE OF THE
1162= DEPOSITIONS I READ --I DON'T KNOW WHETHER IT WAS PATRICIA 1163= BOSTELMAN OR ONE OF THE DEPOSITIONS, ONE OF THE DEFENDANTS'
1164= EXECUTIVES REFERRED TO THE RED BOOK. 1165= Q. NOW --AS I WAS SAYING, THERE ARE A NUMBER OF OTHER LARGE
1166= NATIONAL CHAINS BESIDES BORDERS AND BARNES & NOBLE. FOR 1167= EXAMPLE, THERE'S BOOKS-A-MILLION?
1168= A. RIGHT. 1169= Q. FAMILIAR WITH THAT?
1170= A. YES, I AM. 1171= Q. ARE THEY MEMBERS OF THE ABA?
1172= A. I DO NOT BELIEVE THEY ARE. 1173= Q. NO. THERE'S HASTINGS. ARE YOU FAMILIAR WITH THAT CHAIN?
1174= A. YES, I AM.
1175= Q. I BELIEVE THEY HAVE APPROXIMATELY 125 STORES OR SO? 1176= A. RIGHT.
1177= Q. BOOKS-A-MILLION, APPROXIMATELY 150 STORES OR SO? THEY'RE 1178= NOT MEMBERS OF ABA EITHER, ARE THEY?
1179= A. I DON'T BELIEVE THEY ARE. 1180= Q. OKAY. THERE'S CROWN OR SUPER CROWN, AS IT'S SOMETIMES
1181= CALLED. YOU FAMILIAR WITH THAT CHAIN? 1182= A. YES, BUT I'M NOT SURE THEY'RE STILL IN BUSINESS.
1183= Q. THEY WERE --THERE HAS BEEN A BANKRUPTCY FILING THAT YOU'RE 1184= REFERRING TO, I TAKE IT; IS THAT CORRECT?
1185= A. CORRECT. 1186= Q. AND --BY THERE ARE STILL SOME CROWNS IN OPERATION. ARE YOU
1187= FAMILIAR WITH THAT? 1188= A. I HAVEN'T BEEN IN ANY CROWNS RECENTLY.
1189= Q. OKAY. HAVE YOU HEARD OF A COMPANY CALLED MEDIA PLAY? 1190= A. MEDIA PLAY IS BASED IN THE TWIN CITIES.
1191= Q. UM-HMM. AND THAT'S A LARGE CHAIN, CORRECT? 1192= A. CORRECT. 17
17 Page 18 19
1193= Q. HAVE YOU HEARD OF WAL-MART? 1194= A. BE HARD NOT TO HEAR ABOUT WAL-MART.
1195= Q. IT WOULD BE, WOULDN'T IT? THEY'RE SORT OF EVERYWHERE, 1196= AREN'T THEY?
1197= WAL-MART SELLS BOOKS, TOO, DON'T THEY? 1198= A. YES, WAL-MART SELLS BOOKS.
1199= Q. WAL-MART'S NOT A MEMBER OF THE ABA?
1200= A. NOT TO MY KNOWLEDGE. 1201= Q. YOU'VE HEARD OF COSTCO?
1202= A. OH, YES. 1203= Q. OKAY. COSTCO SELLS BOOKS, DOESN'T IT?
1204= A. IT DOES. 1205= Q. COSTCO'S NOT A MEMBER OF THE ABA?
1206= A. NO, COSTCO IS NOT. 1207= Q. OKAY. HAVE YOU HEARD OF K-MART?
1208= A. YES. 1209= Q. OKAY. K-MART SELLS BOOKS, DOESN'T IT?
1210= A. THEY CERTAINLY DO. 1211= Q. K-MART'S NOT A MEMBER OF THE ABA, CORRECT?
1212= A. THAT'S CORRECT. 1213= Q. WHEN YOU ADD UP ALL OF THESE VARIOUS COMPANIES, AND YOU --
1214= NATIONAL CHAINS, AND YOU TALK ABOUT THE VOLUME OF BOOKS THAT 1215= THEY SELL, DOES IT EXCEED THE VOLUME OF BOOKS SOLD BY THE
1216= MEMBERS OF THE ABA? 1217= A. YES, IT DOES. I THINK I'VE SEEN FIGURES ON THAT.
1218= Q. AND IN ADDITION TO THAT, THERE ARE OTHER INDEPENDENT BOOK 1219= STORES THAT FOR WHATEVER REASON HAVE ELECTED NOT TO JOIN THE
1220= ABA, CORRECT? 1221= A. YES.
1222= Q. AND THEN THERE'S AMAZON, CORRECT? THEY SELL BOOKS? 1223= A. THEY CERTAINLY DO.
1224= Q. NOT MEMBERS OF THE ABA?
1225= A. THAT'S A DIFFERENT WAY OF SELLING BOOKS. 1226= Q. NOW, MS. SEE, YOU DON'T KNOW THE TERMS UNDER WHICH COSTCO
1227= PURCHASES ITS BOOKS, CORRECT? 1228= A. THAT IS CORRECT.
1229= Q. YOU DON'T KNOW THE TERMS UNDER WHICH WAL-MART PURCHASES ITS 1230= BOOKS, CORRECT?
1231= A. THAT IS CORRECT. 1232= Q. YOU DON'T KNOW THE TERMS UNDER WHICH --LET'S SEE, DID I --
1233= COSTCO, WAL-MART --K-MART PURCHASES ITS BOOKS, CORRECT? 1234= A. THAT IS CORRECT.
1235= Q. YOU DON'T KNOW THE TERMS UNDER WHICH BOOKS-A-MILLION 1236= PURCHASES ITS BOOKS, CORRECT?
1237= A. THAT IS CORRECT. 1238= Q. YOU DON'T KNOW THE TERMS UNDER WHICH SUPER CROWN PURCHASES
1239= ITS BOOKS? 1240= A. THAT'S CORRECT.
1241= Q. IN FACT, OTHER THAN THE DOCUMENTS YOU'VE EXAMINED IN THIS 1242= CASE, YOU DON'T KNOW THE TERMS AND CONDITIONS UNDER WHICH ANY OF
1243= THE NATIONAL CHAINS PURCHASED BOOKS FROM PUBLISHERS, CORRECT? 1244= A. THAT IS CORRECT.
1245= Q. NOW, I WANTED TO TAKE A MOMENT AND JUST GO OVER A BIT THE 1246= DOCUMENTS THAT YOU'VE DISCUSSED TODAY IN YOUR DIRECT
1247= EXAMINATION. 1248= FIRST, I WANTED TO JUST SORT OF DATE THESE DOCUMENTS
1249= AS --BY MY TALLY, AND PLEASE INDICATE IF I'M INCORRECT, THE
1250= FIRST BARNES & NOBLE DOCUMENT THAT YOU DISCUSSED I BELIEVE WAS 1251= IN TAB 5, THAT'S A 1995 TERMS PROFILE; IS THAT CORRECT?
1252= A. THAT IS CORRECT, BUT I HAVE EXAMINED MANY, MANY, MANY BARNES 1253=& NOBLES TERMS PROFILE.
1254= Q. BUT --1255= A. I ALSO HAVE EXAMINED TERMS PROFILES FOR LATER YEARS. I WAS
1256= NOT ALLOWED TO TESTIFY ABOUT WHAT I'VE EXAMINED. 1257= (CONTINUED NEXT PAGE; NOTHING OMITTED.)
1258= 1259=
1260= 1261=
1262= 18
18 Page 19 20
1263= 1264=
1265= 1266=
1267= 1268=
1269= 1270=
1271= 1272=
1273= 1274=

1275= BY MR. WELSH: 1276= Q. YOU ALSO EXAMINED TERMS FOR '96, '97, '98, CORRECT?
1277= A. AND EARLIER YEARS, YES. 1278= Q. AND EARLIER YEARS. THOSE DOCUMENTS ARE NOT IN THIS BINDER,
1279= ARE THEY? 1280= A. NO.
1281= Q. OKAY. 1282= A. HOWEVER, I HAVE BEEN THROUGH THEM.
1283= Q. NOW, THE NEXT DOCUMENT I SEE IN HERE IS A 1995 MEMO, AND 1284= THAT IS IN TAB 7. CORRECT? THAT WOULD BE THE DATE FOR TAB 7,
1285= 1995? 1286= A. CORRECT.
1287= Q. THEN I THINK WE MOVE ON TO TAB 11. THAT'S A 1994 DOCUMENT, 1288= CORRECT?
1289= A. THAT IS CORRECT, BUT AGAIN, I HAVE SEEN MANY SIMILAR 1290= DOCUMENTS. OBVIOUSLY, WE COULDN'T BING IN ALL THE DOCUMENTS
1291= THAT I'VE READ. 1292= Q. BUT YOU DID NOT INCLUDE AND DISCUSS SPECIFICALLY IN YOUR
1293= DIRECT EXAMINATION --JUST LET ME FINISH THE QUESTION --1294= ACCOUNTS PAYABLE REPORTS FOR '99, '98, '97, '96 OR '95,
1295= CORRECT? 1296= A. I DID NOT INCLUDE THEM IN MY REPORT, FOR MY DIRECT
1297= EXAMINATION. HOWEVER, I HAVE REVIEWED THEM. 1298= Q. NOW, THE NEXT DOCUMENT WE HAVE HERE IS --I THINK IS IN TAB
1299= 12, A SERIES OF 1997 DOCUMENTS, IS THAT CORRECT?
1300= A. THAT'S RIGHT. 1301= Q. OKAY. AND THEN MOVING ON TO TAB 13, THE TOP VENDOR REPORT,
1302= THAT'S A SERIES OF 1996 DOCUMENTS, CORRECT? 1303= A. I'M TRYING TO FIND THE DATE. YES, THAT IS RIGHT.
1304= Q. GOING BACK FOR A MOMENT TO TAB 11, WHICH IS THE MAY, 1994 1305= ACCOUNTS PAYABLE REPORT, YOU MENTIONED THAT YOU HAD REVIEWED
1306= OTHER SUCH REPORTS, IS THAT CORRECT? 1307= A. YES, IT IS.
1308= Q. AND IS IT NOT TRUE, MS. SEE, THAT THERE ARE NO ACCOUNTS 1309= PAYABLE REPORTS BY BARNES & NOBLE AFTER THE SPRING OF 1995 THAT
1310= REFER OR REPORT ON ANY SO-CALLED SPECIAL DEALS? 1311= A. YES, I REALIZE THAT.
1312= Q. THANK YOU. 1313= A. HOWEVER, IT JUST MEANS THEY HAD STOPPED REPORTING. MY
1314= UNDERSTANDING MIGHT BE THAT THEY HAD JUST STOPPED REPORTING. 1315= MR. WELSH: I WOULD MOVE TO STRIKE AS WITHOUT
1316= FOUNDATION, YOUR HONOR. IT'S PURE SPECULATION. 1317= THE COURT: THE MOTION TO STRIKE IS GRANTED.
1318= BY MR. WELSH: 1319= Q. WE MOVE ON NOW TO TAB 14, AND THAT IS A 1997 E-MAIL,
1320= CORRECT? 1321= A. YES, IT IS.
1322= Q. AND THEN I THINK WE FINISH OFF HERE WITH TAB 16, WHICH IS A 1323= SET OF --WHICH IS A 1996 E-MAIL, CORRECT?
1324= A. TAB 16 ACTUALLY IS A 1998 RED BOOK.
1325= Q. I APOLOGIZE. THERE'S A TAB 15. TAB 15. EXCUSE ME. 1326= A. YES.
1327= Q. 1996. 1328= A. CORRECT.
1329= Q. AND I BELIEVE THAT ROUNDS OUT THE DOCUMENTS INCLUDED IN 1330= THIS NOTEBOOK PERTAINING TO BARNES & NOBLE, IS THAT CORRECT?
1331= A. THAT IS CORRECT, BUT I WOULD JUST LIKE TO REITERATE THAT I 1332= DID REVIEW MANY, MANY DOCUMENTS. 19
19 Page 20 21
1333= Q. I UNDERSTAND, YOU'VE SAID THAT REPEATEDLY, BUT I'D 1334= APPRECIATE IT, JUST SO WE CAN GET THROUGH THIS, IF I'VE GOT A
1335= QUESTION OUT THERE AND YOU CAN ANSWER IT YES OR NO, I'D 1336= APPRECIATE IT IF YOU DID THAT. THANK YOU.
1337= NOW, LET'S TURN FIRST TO TAB 5. THIS IS A 1995 AVON 1338= TERM --SO-CALLED TERMS PROFILE, CORRECT?
1339= A. YES, IT IS A TERMS PROFILE. 1340= Q. NOW, YOU INTERPRET THIS DOCUMENT AS PROVIDING AN ADDITIONAL
1341= DISCOUNT TO BARNES & NOBLE WITH REGARD TO ITS RDC THAN IS 1342= STATED IN THE RED BOOK, CORRECT?
1343= A. THAT IS CORRECT. 1344= Q. OKAY. YOU DON'T QUARREL WITH THE FACT THAT THE RETAIL DROP
1345= SHIPMENT PERCENTAGES THAT ARE THERE, 44 AND 46, ARE WHAT'S IN 1346= THE RED BOOK, CORRECT?
1347= A. THAT IS CORRECT. 1348= Q. OKAY. NOW, DO YOU RECALL IN YOUR REPORT THAT YOU SIMILARLY
1349= CONCLUDED THAT THERE WAS A 2 PERCENT VARIATION BETWEEN WHAT WAS
1350= IN THE RED BOOK AND WHAT WAS ON A BARNES & NOBLE'S TERM PROFILE 1351= WITH REGARD TO MACMILLAN?
1352= MR. SPIVA: OBJECTION, YOUR HONOR. HE HAS 1353= MISCHARACTERIZED THE TESTIMONY AND THE DOCUMENT.
1354= MR. WELSH: WE WILL GO TO IT, YOUR HONOR, AND WE'LL 1355= SEE.
1356= THE COURT: ALL RIGHT. 1357= BY MR. WELSH:
1358= Q. DO YOU RECALL IN YOUR REPORT YOU IDENTIFIED A 2 PERCENT 1359= DIFFERENCE --
1360= A. YES. 1361= Q. --WITH REGARD TO MACMILLAN?
1362= A. YES, I DO. 1363= Q. OKAY. AND I'D LIKE YOU TO TURN TO TAB 4 OF THE BINDER, AND
1364= THAT'S --DO YOU HAVE THAT? 1365= A. I DO, BUT EXCUSE ME, I WAS NOT ALLOWED TO USE THIS, THIS
1366= MORNING. THIS IS THE 19 --THIS IS THE YEAR 2000. 1367= Q. NO, NO, I'M SORRY, YOU'RE IN THE WRONG BOOK.
1368= MAY I APPROACH THE WITNESS? 1369= A. SORRY, YOU DIDN'T EXPLAIN TO ME I HAD THE WRONG BOOK.
1370= Q. WE'RE GOING TO BE USING MY BOOK. 1371= A. ALL RIGHT.
1372= Q. THANK YOU. I APOLOGIZE FOR NOT MAKING THAT CLEAR. OKAY, 1373= DO YOU HAVE THAT IN FRONT OF YOU?
1374= A. I DO.
1375= Q. OKAY. AND DURING YOUR DEPOSITION IT WAS POINTED OUT TO YOU 1376= THAT THE 2 PERCENT VARIATION OR DIFFERENCE THAT YOU HAD
1377= REPORTED IN YOUR REPORT COULD --1378= MR. SPIVA: OBJECTION, YOUR HONOR. WE WOULD REQUEST
1379= THE PAGE AND LINE BE PROVIDED. 1380= THE COURT: YOU REFERRED TO TAB 4.
1381= MR. SPIVA: HE'S REFERRING TO HER DEPOSITION NOW, 1382= YOUR HONOR.
1383= MR. WELSH: I'M SIMPLY SETTING IT UP IN TERMS OF, 1384= THIS WAS SOMETHING SHE WENT OVER IN HER DEPOSITION.
1385= MR. SPIVA: I KNOW YOU'RE SETTING IT UP, BUT I THINK 1386= SHE SHOULD BE PERMITTED TO SEE THE PAGE AND LINE NUMBER.
1387= THE COURT: CAN YOU PHRASE YOUR QUESTION ANOTHER 1388= WAY?
1389= MR. WELSH: LET ME REPHRASE IT. 1390= Q. DO YOU RECALL BEING SHOWN AT YOUR DEPOSITION THE LINE AT
1391= THE BOTTOM OF THE MACMILLAN PUBLISHING TERM SHEET? 1392= A. OH, I DO RECALL.
1393= Q. AND THAT LINE SAYS, "MACMILLAN RETAIL DISCOUNT INCLUDES 1394= ADDITIONAL 2 PERCENT FOR ELECTRONIC ORDERS." DO YOU RECALL
1395= THAT? 1396= A. YES, I DO REMEMBER THIS.
1397= Q. AND YOU RECALL LOOKING AT THE RDC --OR, EXCUSE ME --THE 1398= RED BOOK ENTRY FOR MACMILLAN FOR 1995, WHICH IS PROVIDED IN THE
1399= NEXT --
1400= A. RIGHT. 1401= Q. --EXHIBIT. AND DO YOU RECALL LOOKING AT THE SECTION ON
1402= ELECTRONIC ORDERING, WHICH STATES, "CONTACT MGR SALES REP FOR 20
20 Page 21 22
1403= DETAILS"? YOU SEE THAT? 1404= A. I DO SEE THAT.
1405= Q. OKAY. NOW, I'M SORRY TO DO THIS TO YOU, MS. SEE, BUT I DO 1406= NEED YOU TO GO BACK TO THE OTHER BOOK. I'M SORRY.
1407= A. THAT'S ALL RIGHT, AS LONG AS I KNOW. 1408= Q. THAT'S RIGHT, AND I'LL TRY TO MAKE CLEAR WHICH BOOK WE'RE
1409= IN, BECAUSE I KNOW IT'S CONFUSING. 1410= AND WHEN YOU LOOK TO THE RED BOOK ENTRY FOR AVON
1411= BOOKS, IT REFERENCES ELECTRONIC ORDERING, DOESN'T IT? 1412= A. EXCUSE ME, ARE YOU IN TAB 6?
1413= Q. YES, I AM. 1414= A. YES, I SEE THE ELECTRONIC ORDER.
1415= Q. AS YOU SIT HERE TODAY, YOU DON'T KNOW WHETHER THE 1416= ADDITIONAL 2 PERCENT THAT BARNES & NOBLE RECEIVED WITH REGARD
1417= TO --OR THAT IS IDENTIFIED ON THE TERMS PROFILE SHEET THAT 1418= YOU'VE LOOKED AT, IS ACCOUNTED FOR IN TERMS OF A 2 PERCENT
1419= ELECTRONIC ORDERING DISCOUNT OF THE SAME KIND THAT MACMILLAN 1420= PROVIDED BARNES & NOBLE IN THE SAME YEAR, CORRECT?
1421= A. CORRECT, BUT THE 2 PERCENT --ARE YOU REFERRING TO THE 1422= RETAIL DROP SHIP? BECAUSE I WAS REFERRING TO THE RETAIL
1423= DISTRIBUTION CENTER DISCOUNT WHEN I WAS REFERRING TO THE AVON 1424= TERMS PROFILE.

1425= Q. I UNDERSTAND, BUT THERE LIKEWISE COULD BE A 2 PERCENT 1426= DISCOUNT PROVIDED FOR ELECTRONIC ORDERING WITH REGARD TO THE
1427= RDC. 1428= A. AND I WAS ALSO REFERRING TO THE 4 PERCENT INCENTIVE.
1429= Q. LET'S --I'M SORRY, BUT WE'LL DEAL WITH THAT IN JUST A 1430= SECOND. OKAY. I JUST WAS FOCUSING ON 50 PERCENT. OKAY.
1431= NOW, LET'S TURN TO THE 4 PERCENT INCENTIVE. THAT'S 1432= A VOLUME INCENTIVE, ISN'T IT?
1433= A. IT IS A DISTRIBUTOR DISCOUNT INCENTIVE. 1434= Q. MS. SEE, WOULD YOU TURN TO YOUR --THE DIRECT --
1435= PLAINTIFFS' TAB 7, AND TO THE SECOND DOCUMENT, I BELIEVE IT IS, 1436= IN THAT TAB, BEARING BATES NUMBER BN 0151087. DO YOU HAVE
1437= THAT? 1438= A. I DO HAVE THAT.
1439= Q. AND IT STATES THERE --THAT'S THE AVON, "PLUS 4 PERCENT, 1440= BASED ON VOLUME OF," DO YOU SEE THAT?
1441= A. I DO SEE THAT. 1442= Q. OKAY.
1443= A. BUT THE POINT I WAS MAKING IN MY TESTIMONY, IN MY 1444= EXPLANATION THIS MORNING, WAS THAT THE LATTER LETTER TO AVON
1445= FROM AVON --EXCUSE ME --TO AVON FROM BARNES & NOBLE, REFERS 1446= TO AVON'S DISTRIBUTOR DISCOUNT INCENTIVE, AND MY POINT IS THAT
1447= THERE'S A DIFFERENCE. A DISTRIBUTOR MEANS WHOLESALER. 1448= Q. DID YOU SPEAK TO ANYONE AT AVON TO CONFIRM YOUR
1449= INTERPRETATION OF THIS?
1450= A. NO, BUT I THINK I KNOW THE MEANING OF THE TERM 1451=" DISTRIBUTOR."
1452= Q. IT'S TRUE, THOUGH, IS IT NOT, THAT THE SAME 4 PERCENT --1453= ADDITIONAL 4 PERCENT DISCOUNT IS LISTED ON THIS PAGE AS BASED
1454= ON VOLUME, THAT WE'VE JUST REFERRED TO, CORRECT? 1455= A. YES.
1456= Q. OKAY. 1457= A. AND DISTRIBUTOR INCENTIVES ARE BASED ON VOLUME.
1458= Q. AND IT IS COMMON IN THE BOOKSELLING INDUSTRY TO PROVIDE 1459= DISCOUNTS BASED ON VOLUME. YOU TESTIFIED TO THAT YESTERDAY,
1460= CORRECT? 1461= A. YOUR DISCOUNT SCHEDULE IS BASED ON VOLUME, AND INCENTIVE IS
1462= A LITTLE DIFFERENT. 1463= Q. BUT INCENTIVES ARE COMMONLY BASED ON VOLUME, AS WELL,
1464= CORRECT? 1465= A. YES.
1466= Q. THANK YOU. NOW, IN YOUR TESTIMONY YESTERDAY YOU REFERRED 1467= TO WHOLESALERS, AND I'D LIKE TO JUST READ A BRIEF EXCHANGE,
1468= WHERE YOU DESCRIBE THE FUNCTIONS PERFORMED BY A WHOLESALER. 1469= QUESTIONS POSED BY --AND THIS IS FROM YESTERDAY'S TRANSCRIPT,
1470= AT PAGE 331, LINE 25, THROUGH 332, LINE 3: 1471= "Q. MS. SEE, WHEN A PUBLISHER SELLS TO A
1472= WHOLESALER, WHAT IS YOUR UNDERSTANDING OF 1473= ESSENTIALLY HOW THAT ARRANGEMENT NORMALLY WORKS? 21
21 Page 22 23
1474= "A. WHEN A PUBLISHER SELLS TO A WHOLESALER, THE
1475= WHOLESALER RECEIVES THE BOOKS, PUTS THOSE BOOKS IN 1476= THE INVENTORY, AND THEN SELLS THOSE BOOKS TO
1477= BOOKSTORES AT THEIR WHOLE-," AND THEN THERE'S A 1478= DASH, "THEIR WHOLESALER DISCOUNT."
1479= IN THAT TESTIMONY, MR. SEE, YOU IDENTIFIED 1480= BASICALLY, AS I SEE IT, THREE FUNCTIONS: RECEIVING THE BOOKS,
1481= INVENTORYING THE BOOKS, AND THEN DISTRIBUTING THE BOOKS TO 1482= RETAIL OUTLETS, CORRECT?
1483= A. SELLING THE BOOKS TO RETAIL OUTLETS. 1484= Q. IN TERMS OF THE FUNCTIONS PERFORMED BY A WHOLESALER, FROM A
1485= PUBLISHER'S PERSPECTIVE, THE ARRANGEMENT BETWEEN A WHOLESALER 1486= AND A RETAIL OUTLET IS NOT THE PUBLISHER'S CONCERN, FOR
1487= EXAMPLE. IF A WHOLESALER WANTED TO GIVE EXTRAORDINARY 1488= DISCOUNTS, NEVER HEARD OF BEFORE, THAT WOULD BE UP TO THE
1489= WHOLESALER, AND THE PUBLISHER COULD NOT PREVENT IT, CORRECT? 1490= A. THAT IS CORRECT.
1491= Q. OKAY. SO THE RELATIONSHIPS BETWEEN WHOLESALERS AND 1492= RETAILERS ARE BASICALLY TO BE DETERMINED BY WHOLESALERS AND
1493= RETAILERS, NOT BY PUBLISHERS, CORRECT? 1494= A. YES.
1495= Q. OKAY. THE PUBLISHER PROVIDES A DISCOUNT TO WHOLESALERS FOR 1496= THE FUNCTIONS THAT THE WHOLESALER PERFORMS IN THE DISTRIBUTION
1497= PROCESS, CORRECT? 1498= A. YES.
1499= Q. AND LOOKING AT IT FROM A DISTRIBUTION PERSPECTIVE, THOSE
1500= FUNCTIONS ARE RECEIVING THE BOOKS, INVENTORYING THE BOOKS AT 1501= THE WHOLESALER'S WAREHOUSE, AND THEN DISTRIBUTING THOSE BOOKS
1502= OUT TO THE RETAIL OUTLETS, CORRECT? 1503= A. YES.
1504= Q. OKAY. AND IS IT NOT TRUE, MS. SEE, THAT ALL THREE OF THOSE 1505= FUNCTIONS THAT WE'VE JUST DISCUSSED ARE PERFORMED BY BARNES &
1506= NOBLE'S RETAIL DISTRIBUTION CENTER? 1507= MR. SPIVA: OBJECTION, LACKS FOUNDATION, YOUR HONOR.
1508= THE COURT: ACTUALLY, SHE'S TESTIFYING AS YOUR 1509= EXPERT.
1510= THE WITNESS: I DON'T KNOW HOW THE BARNES & NOBLE 1511= RETAILERS' RETAIL DISTRIBUTION CENTER WORKS.
1512= BY MR. WELSH: 1513= Q. I WILL REPRESENT TO YOU, THEN, MS. SEE, THAT ALL THREE OF
1514= THOSE FUNCTIONS ARE PERFORMED BY THE BARNES & NOBLE RETAIL 1515= DISTRIBUTION CENTER.
1516= COULD YOU LOOK AT ME, PLEASE? THANK YOU. 1517= ALL RIGHT. I WILL REPRESENT THAT ALL THREE OF THOSE
1518= FUNCTIONS ARE PERFORMED BY THE BARNES & NOBLE RETAIL 1519= DISTRIBUTION CENTER AND THAT'S WHAT THE EVIDENCE SHOWS.
1520= SO ACCEPTING MY REPRESENTATION, SINCE YOU DON'T KNOW 1521= AND HAVE NO OPINION ON THE BARNES & NOBLE RETAIL DISTRIBUTION
1522= CENTER AND HOW IT OPERATES, BUT ACCEPTING MY REPRESENTATION, 1523= THEN, YOU WOULD AGREE THAT THE VERY FUNCTIONS YOU IDENTIFIED AS
1524= BEING PERFORMED BY A WHOLESALER ARE BEING PERFORMED BY A BARNES
1525=& NOBLE RETAIL DISTRIBUTION CENTER, CORRECT? 1526= A. YES, IF THAT'S YOUR REPRESENTATION.
1527= Q. THANK YOU. I'D NOW LIKE TO TALK A LITTLE BIT ABOUT STOCK 1528= OFFERS, AND IN PARTICULAR, THE ONE STOCK OFFER THAT YOU
1529= MENTIONED IN YOUR DIRECT EXAMINATION. 1530= FORGIVE ME, MS. SEE, BUT IS THERE A TAB RELATING TO
1531= THAT PARTICULAR STOCK OFFER? 1532= A. JUST A MOMENT. I'LL TELL YOU. IT WAS TAB 12, THE BANTAM
1533= DOUBLEDAY FLEX STOCK OFFER. 1534= Q. YES, THANK YOU. NOW, I WANTED TO JUST CLARIFY SOMETHING.
1535= LET'S TURN TO THE STOCK OFFER ITSELF. I BELIEVE THAT'S ON PAGE 1536= 14.
1537= I LISTENED --I TRIED TO LISTEN CAREFULLY TO YOUR 1538= DISCUSSION OF THE STOCK OFFER, AND WHAT I HEARD YOU SAY WAS
1539= THAT THE STOCK OFFER PERMITTED SOMEONE TO --A BOOKSELLER TO 1540= PLACE FOUR ORDERS UP TO 200 BOOKS PER ORDER, BUT THAT'S NOT
1541= WHAT THE STOCK OFFER SAYS, IS IT? 1542= A. AT LEAST 200.
1543= Q. THERE'S NO LIMITS ON HOW MANY BOOKS CAN BE PURCHASED UNDER 22
22 Page 23 24
1544= THIS STOCK OFFER. 1545= A. CORRECT, AND I MISSPOKE.
1546= Q. AND I WANT TO GIVE YOU A HYPOTHETICAL. SUPPOSE YOU'RE A 1547= PUBLISHER, AND YOU HAVE A STOCK OFFER SIMILAR TO THE ONE BY
1548= BDB. AND AS YOU TESTIFIED YESTERDAY, THE PURPOSE OF STOCK 1549= OFFERS IS TO SELL BOOKS, RIGHT?

1550= A. CORRECT. 1551= Q. ALL RIGHT. YOU WANT TO SELL AS MANY AS YOU CAN IN AS SHORT
1552= A PERIOD OF TIME AS YOU CAN, RIGHT? 1553= A. YES.
1554= Q. OKAY. NOW, LET ME GIVE YOU THIS HYPOTHETICAL. SUPPOSE 1555= YOU'RE STILL OPERATING THE BOOKCASE AND YOU PLACE AN ORDER FOR
1556= THESE BOOKS, AND YOU GET A CALL FROM BDD AND IT SAYS, "WE'VE 1557= GOT SOME GOOD NEWS FOR YOU, MS. SEE. YOU'RE NUMBER 11 ON THE
1558= LIST, BUT THE BAD NEWS IS, LET ME TELL YOU THE TEN CUSTOMERS 1559= THAT ARE AHEAD OF YOU. BARNES & NOBLE, BORDERS, HASTINGS,
1560= MEDIA PLAY, BOOKS-A-MILLION, SUPER CROWN, COSTCO, K-MART, 1561= WALMART AND AMAZON. AND WE'VE GOT TO FULFILL ALL OF THOSE
1562= ORDERS BEFORE WE CAN GET TO YOURS. AND BECAUSE THESE LARGE 1563= NATIONAL CHAINS HAVE RETAIL DISTRIBUTION CENTERS AND THEY CAN
1564= INVENTORY AN AWFUL LOT OF BOOKS, THEY HAVE PLACED LITTER --1565= THEY HAVE PLACED ORDERS FOR LITERALLY TENS OF THOUSANDS OF
1566= BOOKS. SO IT'S GOING TO TAKE US AWHILE TO GET TO YOUR ORDER." 1567= OKAY?
1568= THE ANALOGY IS SORT OF TRYING TO PUT A PIG THROUGH A 1569= SNAKE, IF YOU WILL, MS. SEE. DO YOU HAVE ANY FAMILIARITY WITH
1570= THE PROBLEMS THAT PUBLISHERS CONFRONT WHEN THEY RECEIVE FROM 1571= ALL THESE NATIONAL CHAINS THESE HUGE, VOLUMINOUS ORDERS? DO
1572= YOU HAVE ANY PERSONAL EXPERIENCE WITH THAT? 1573= A. NO.
1574= Q. DO YOU HAVE ANY PERSONAL EXPERIENCE IN DEALING WITH THE
1575= LOGISTICAL ISSUES THAT RECEIVING THOSE KINDS OF ORDERS ENTAIL? 1576= A. NO.
1577= Q. IT WOULD BE RATIONAL, IT WOULD BE A SOUND BUSINESS DECISION 1578= FOR A PUBLISHER TO SAY TO THE CHAINS, "LOOK, GUYS, WE JUST
1579= CAN'T PROCESS THESE ORDERS IN THIS NUMBER. DO US A FAVOR. 1580= FIGURE OUT HOW MANY BOOKS YOU WANT TO BUY, ACCORDING TO A STOCK
1581= OFFER, AND THEN BREAK THEM DOWN INTO SMALLER ORDERS, SO THAT WE 1582= CAN TRY TO PROCESS THEM THROUGH OUR NORMAL SYSTEM, WITHOUT JUST
1583= RUNNING AMOK, IN TERMS OF OUR DISTRIBUTION SYSTEM." 1584= THAT WOULD BE A RATIONAL RESPONSE BY A PUBLISHER,
1585= WOULDN'T IT? 1586= A. IT MIGHT BE A RATIONAL RESPONSE BY THE PUBLISHER, BUT THEN
1587= IF THEY'RE GOING TO DO THAT, THAT SHOULD BE PART OF THE STOCK 1588= OFFER. THERE ARE --
1589= Q. BUT SINCE, UNDER THE TERMS OF THIS OFFER, AS WE'VE 1590= ESTABLISHED, THE CHAINS CAN BUY AS MANY BOOKS AS THEY WANT
1591= UNDER THESE OFFERS, RIGHT? THERE'S NO LIMITATION HERE, 1592= CORRECT?
1593= A. CORRECT, BUT WE --1594= Q. BUT JUST FOLLOW ME. STAY WITH ME HERE. THERE'S NO
1595= LIMITATION. SO THEY COULD ORDER A HUNDRED THOUSAND UNITS UNDER 1596= THIS OFFER AND STILL KEEP WITHIN THE TERMS OF THE STOCK OFFER,
1597= CORRECT? 1598= A. THAT IS CORRECT, BUT WE KNOW THAT THE CHAINS USE
1599= JUST-IN-TIME INVENTORY. THEY'RE NOT --IT WOULD BE MY OPINION
1600= THAT THEY WOULD NOT BE ORDERING THOUSANDS OF BOOKS AT ONE 1601= POINT.
1602= Q. DO YOU HAVE ANY UNDERSTANDING OF WHAT --WELL, NO, YOU 1603= DON'T HAVE UNDERSTANDING ABOUT WHAT THE RDC IS FOR, CORRECT, AS
1604= YOUR --1605= A. I DO --EXCUSE ME --
1606= Q. YOUR COUNSEL OBJECTED ON LACK OF FOUNDATION, SO I WON'T --1607= MR. SPIVA: OBJECTION, YOUR HONOR. HE'S NOT
1608= ALLOWING THE WITNESS TO FINISH HER ANSWER. 1609= BY MR. WELSH:
1610= Q. IT IS POSSIBLE FOR CHAINS TO USE THEIR NATIONAL --THEIR 1611= RETAIL DISTRIBUTION CENTERS TO HOUSE BOOKS SO THAT THEY CAN
1612= THEN DELIVER THOSE BOOKS TO THEIR RETAIL STORES JUST IN TIME AS 1613= THEY NEED THEM, CORRECT? 23
23 Page 24 25
1614= A. I UNDERSTAND THAT. YES. 1615= Q. OKAY, GOOD. GOOD. SO IT MAKES SENSE, THEN, FOR
1616= PUBLISHERS, OR FOR NATIONAL CHAINS, TO TAKE ADVANTAGE OF THESE 1617= STOCK OFFERS AND BUY A LOT OF BOOKS.
1618= A. AND THERE ARE OTHER STORES THAT MIGHT ALSO BE ABLE TO DO 1619= THIS. THE TATTERED COVER, POWELL'S, THERE ARE OTHERS WHO HAVE
1620= RETAIL DISTRIBUTION CENTERS. THIS WAS SIGNED JUST FOR BARNES & 1621= NOBLE.
1622= Q. NOW, YOU HAVE NO KNOWLEDGE, AS YOU SIT HERE TODAY, YOU 1623= WOULD BE PURELY SPECULATING IF YOU WERE TO SAY THAT TATTERED
1624= COVERS DIDN'T RECEIVE THE SAME DEAL, ISN'T THAT RIGHT? YOU'D
1625= BE PURELY SPECULATING. 1626= A. THAT IS TRUE.
1627= Q. OKAY. AND WE DON'T WANT YOU TO DO THAT. 1628= A. NO.
1629= Q. OKAY, BUT LET'S SEE IF WE CAN MOVE FROM SPECULATION TO 1630= TESTIMONY, AND HERE I'D LIKE YOU TO GO TO TAB 11 IN MY BINDER.
1631= SORRY. 1632= A. THANK YOU.
1633= Q. AND I'D LIKE YOU TO GO TO THE VERY END, WHERE THERE IS A 1634= PORTION OF THE DEPOSITION TESTIMONY OF PATRICIA BOSTELMAN, AND
1635= LET ME READ THE TESTIMONY I'M INTERESTED IN. IT BEGINS ON PAGE 1636= 550, AND GOES OVER TO 551.
1637= NOW, JUST TO EXPLAIN, PAGE 550 IS THE SMALLER PAGE 1638= ON THE UPPER RIGHT-HAND QUADRANT AND THEN IT MOVES DOWN TO 551
1639= BELOW, AND MS. BOSTELMAN SAYS --I WON'T QUOTE THE FIRST PART 1640= OF HER --FIRST PARAGRAPH OF HER ANSWER, BUT SHE SAYS,
1641= "MANY --TO FULLY TAKE ADVANTAGE OF AN OFFER LIKE 1642= THIS, UNDER THE TIME FRAME AS THE WRITTEN POLICY,
1643= BARNES & NOBLE WOULD HAVE TO SPEND OUR ORDERING FOR 1644= SOME PERIOD OF TIME TO INCREASE THE SIZE OF THOSE
1645= ORDERS TO ACHIEVE THAT --TO ACHIEVE ANY BENEFIT OF 1646= THEM, AND BDD AGREED WITH BARNES & NOBLE IN
1647= DISCUSSIONS THAT IT WOULD BE DISRUPTIVE TO BDD'S 1648= BUSINESS, AS WELL AS BARNES & NOBLE'S BUSINESS, TO
1649= HAVE TO STRUCTURE OUR ORDERING PATTERN THAT WAY, TO
1650= TAKE COMPARABLE ADVANTAGE OF THOSE STOCK OFFERS AS 1651= THEY AGREE TO A FREQUENCY APPROACH."
1652= DO YOU SEE THAT? 1653= A. I DO, AND I'M READING FURTHER ON, THAT IT SAYS --
1654= THE COURT: WELL, LET YOUR COUNSEL PROCEED. 1655= THE WITNESS: THANK YOU.
1656= BY MR. WELSH: 1657= Q. YOU HAVE NO PERSONAL KNOWLEDGE THAT BARNES & NOBLE, BY
1658= AGREEING WITH BDD TO ADOPT A FREQUENCY APPROACH WITH REGARD TO 1659= THIS STOCK OFFER, WAS ABLE TO PURCHASE ANY MORE BOOKS THAN IT
1660= OTHERWISE WOULD HAVE PURCHASED HAD IT SIMPLY PLACED LARGER 1661= ORDERS, CORRECT?
1662= A. CORRECT. THERE WERE NO LIMITS ON THE NUMBER OF BOOKS. 1663= Q. THAT'S RIGHT. NOW, LET'S MOVE ON AND --I THINK THAT'S ALL
1664= YOU HAD ON STOCK OFFERS. LET'S MOVE ON AND TALK ABOUT 1665= STATISTICAL RESERVE, AND I BELIEVE THAT'S IN TAB 14 AND TAB 15.
1666= WE CAN BEGIN WITH TAB 14. 1667= NOW, YOU REFERRED TO THIS CORRESPONDENCE FOR THE
1668= PURPOSE OF INDICATING THAT.... I'M SORRY. WAIT, LET ME STOP. 1669= A. THE TAB I HAVE IS A DEPOSITION --
1670= Q. I'M SORRY, I APOLOGIZE. WE'RE BACK IN THE OTHER BINDER. 1671= I'M VERY SORRY. LET ME GIVE YOU A MOMENT TO GET TO TAB 14.
1672= A. OKAY. 1673= Q. NOW, YOU REFERRED TO THIS CORRESPONDENCE AS INDICATING TO
1674= YOU THAT BARNES & NOBLE WAS TAKING A STATISTICAL RESERVE IN
1675= EXCESS OF WHAT IT KNEW IT WAS ALLOWED TO TAKE. THAT'S YOUR 1676= INTERPRETATION OF THESE DOCUMENTS?
1677= A. NO. EXCUSE ME. COULD YOU REPEAT THAT? IT WAS ALLOWED TO 1678= TAKE...?
1679= Q. THAT BARNES & NOBLE WAS TAKING A STATISTICAL RESERVE --1680= A. RIGHT.
1681= Q. --IN EXCESS OF WHAT IT KNEW IT SHOULD BE ABLE TO TAKE. 1682= A. WELL, PERHAPS IT WASN'T CLEAR IN MY TESTIMONY. I WAS
1683= TRYING TO ESTABLISH THAT BARNES & NOBLE ESTABLISHED THE 24
24 Page 25 26
1684= STATISTICAL RESERVE PERCENTAGES, AND THAT THIS CORRESPONDENCE 1685= REFERRED TO THE MACMILLAN STATISTICAL RESERVES, AND MY
1686= UNDERSTANDING FROM THIS E-MAIL WAS THAT TERRY DWYER, WHO WAS 1687= WITH MACMILLAN, WAS ASKING BARNES & NOBLE TO REDUCE THE
1688= STATISTICAL RESERVE. 1689= Q. OKAY.
1690= A. AND MY UNDERSTANDING WAS, AND I MAYBE WASN'T CLEAR THIS 1691= MORNING, BUT --
1692= Q. I THINK YOU --1693= A. --BUT THAT BARNES & NOBLE ESTABLISHES THESE STATISTICAL
1694= RESERVES, AND TELLS THE PUBLISHERS WHAT THOSE STATISTICAL 1695= RESERVES WILL BE.
1696= Q. SO IN YOUR TESTIMONY, THEN, BARNES & NOBLE DICTATED THE 1697= TERMS TO THE PUBLISHERS, CORRECT, ON STATISTICAL RESERVES?
1698= A. THEY NEGOTIATED WITH THE PUBLISHERS. 1699= Q. SO THEY DIDN'T DICTATE, THEY JUST NEGOTIATED. WHICH IS IT?

1700= A. I BELIEVE THAT THEY --FROM THE OTHER CORRESPONDENCE, NOT 1701= JUST WITH THIS, I SAW A NUMBER OF E-MAILS ON THIS PARTICULAR
1702= TOPIC, AND --1703= Q. IS IT DICTATED OR NEGOTIATED? THAT'S MY QUESTION.
1704= A. I BELIEVE THAT BARNES & NOBLE SET THE STATISTICAL RESERVES. 1705= Q. SO IT DICTATED TERMS.
1706= A. YES. 1707= Q. THAT'S YOUR OPINION?
1708= A. THAT WILL BE MY TESTIMONY. 1709= Q. NOW, GOING BACK TO TAB 13, WHICH LISTS A VARIETY OF
1710= STATISTICAL RESERVES, CORRECT? 1711= A. YES.
1712= Q. AND AS YOU POINTED OUT IN YOUR DIRECT TESTIMONY, FOR EACH 1713= PUBLISHER THERE'S A DIFFERENT STATISTICAL RESERVE, CORRECT?
1714= A. YES. 1715= Q. OKAY. SO SOME ARE AS LOW AS .10.
1716= A. CORRECT. 1717= Q. CORRECT? AND THEN SOME --AND THEN OTHERS GO UP FROM
1718= THERE. IS IT YOUR TESTIMONY THAT WITH REGARD TO, SAY, PACIFIC 1719= PIPELINE, WHICH HAS A STATISTICAL RESERVE OF .10, THAT BARNES &
1720= NOBLE TOLD PACIFIC PIPELINE THAT IT'S 1.0 (SIC) AND IT'S NOT 1721= HIGHER THAN THAT? IS THAT YOUR TESTIMONY?
1722= A. I DON'T QUITE UNDERSTAND THE QUESTION. 1723= Q. WELL, FOR EXAMPLE, THERE ARE HIGHER STATISTICAL RESERVES
1724= THAN THE .10.
1725= A. WELL, THE REASON IT'S --EXCUSE ME, BUT THE REASON THAT 1726= IT'S LOWER FOR PACIFIC PIPELINE IS THAT THEY ARE A WHOLESALER,
1727= AND IN THE BUSINESS THE WHOLESALERS USUALLY HAVE MORE EFFICIENT 1728= AND EFFECTIVE FULFILLMENT, AND SO IT MAKES SENSE TO ME THAT THE
1729= PACIFIC PIPELINE STATISTICAL RESERVE WOULD BE LOWER. 1730= Q. BUT WITH REGARD TO, SAY, BAKER & TAYLOR, IT'S .60.
1731= A. AND I SAW THEM, THAT --YES, IT IS. 1732= Q. OKAY, THAT'S MY QUESTION. I'M JUST ASKING YOU. AGAIN, IF
1733= WE CAN HAVE A YES OR NO, WE CAN REALLY GET THROUGH THIS A LOT 1734= FASTER. THANK YOU VERY MUCH.
1735= SO IS IT YOUR TESTIMONY, THEN, MS. SEE, THAT BARNES 1736=& NOBLE DICTATED TO PACIFIC PIPELINE IT'S GOING TO BE .10 AND
1737= NOTHING MORE, AND THEN WENT AROUND TO BAKER & TAYLOR AND SAID, 1738= IT'S GOING TO BE .60? IS THAT YOUR OPINION?
1739= A. THAT IS MY OPINION, AND I KNOW BAKER & TAYLOR THOUGHT IT 1740= WAS TOO HIGH.
1741= Q. AND SOMEHOW HERE, FOR EACH OF THESE PUBLISHERS, IT IS YOUR 1742= TESTIMONY THAT BARNES & NOBLE DICTATED A DIFFERENT STATISTICAL
1743= RESERVE; THAT THIS WAS NOT THE SUBJECT OF NEGOTIATION, THAT 1744= THIS WAS NOT THE SUBJECT OF ORDINARY BUSINESS GIVE-AND-TAKE,
1745= BUT BARNES & NOBLE MADE A CONSCIOUS DECISION TO DICTATE 1746= DIFFERENT STATISTICAL RESERVES FOR DIFFERENT PUBLISHERS. IS
1747= THAT YOUR TESTIMONY? 1748= A. YES, I BELIEVE THAT'S WHAT THEY WERE DOING.
1749= Q. OKAY. NOW, TURNING TO THE NEXT TAB, TAB 14 AND TAB 15 --
1750= A. WE'RE STILL IN MY NOTEBOOK. 1751= Q. WE'RE STILL IN YOUR NOTEBOOK. I NEED TO MAKE THAT CLEAR,
1752= AND I APOLOGIZE. 1753= A. EXCUSE ME, 14 AND 15? 25
25 Page 26 27
1754= Q. WE'LL START WITH 14. NOW, THE LINE YOU READ FROM THIS WHEN 1755= YOU WERE QUESTIONED BY PLAINTIFFS' COUNSEL WAS THE LAST TWO
1756= LINES ON THE BOTTOM OF THE PAGE. 1757= A. RIGHT.
1758= Q. OKAY. THE LINE ABOVE THAT, WHICH YOU DIDN'T READ, SAYS, "I 1759= WOULD LIKE TO AUDIT FIRST, THEN CHANGE THE SR LATER IN '98."
1760= NOW, THAT INDICATES, DOES IT NOT, THAT BARNES & 1761= NOBLE WANTED TO CONDUCT AN AUDIT TO DETERMINE WHAT THE
1762= APPROPRIATE STATISTICAL RESERVE WOULD BE, AND THEN CHANGE THE 1763= STATISTICAL RESERVE DEPENDING UPON THE OUTCOME OF THE AUDIT?
1764= A. THAT IS WHAT --1765= Q. IS THAT WHAT THAT INDICATES?
1766= A. THAT IS WHAT IT INDICATES, BUT EXCUSE ME, I ALSO REMEMBER, 1767= AS I RECALL FROM SOME OF THE DOCUMENTS I READ, I'M NOT SURE
1768= THOSE AUDITS WERE EVER CONDUCTED. 1769= Q. THOSE DOCUMENTS ARE NOT BEFORE US HERE, ARE THEY?
1770= A. OH, ALL RIGHT, BUT I JUST WANT TO EXPLAIN THAT I WAS --I 1771= DIDN'T PRESENT ALL THE DOCUMENTATION THAT LED TO MY OPINION.
1772= BUT I READ IT ALL. 1773= Q. NOW, LET'S TURN TO TAB 15. NOW, I BELIEVE HERE YOU SAID --
1774= THE PORTION OF THIS DOCUMENT THAT YOU READ ON DIRECT
1775= EXAMINATION --1776= A. YES.
1777= Q. --WAS THE PORTION THAT SAID, "THE BOOK PUBLISHER 1778= PERCENTAGES ARE NOT CURRENTLY FACT-BASED." CORRECT?
1779= A. YES. 1780= Q. OKAY. YOU DIDN'T GO ON AND RCould not acquire words on page 28 EAD THE REST OF THE SENTENCE,
1781= DID YOU? WHY DON'T YOU DO THAT NOW, FOR US. 1782= A. ALL RIGHT.
1783= "THAT IS WHY ONE OF EILEEN'S 1997 OBJECTIVES IS 1784= TO WORK WITH THE DC TO ESTABLISH A DEADLINE TO PULL
1785= OFF FREIGHT AND PERFORM STATISTICAL CONCEALED 1786= SHORTAGE AUDITS."
1787= Q. YES. 1788= A. EXCUSE ME, BUT I REALIZE THAT, BUT AS I SAID BEFORE, I HAD
1789= SEEN DOCUMENTS THAT INDICATED THAT THOSE AUDITS WERE NEVER 1790= CONDUCTED.
1791= Q. THOSE, AGAIN --1792= THE COURT: NEVER MIND --
1793= THE WITNESS: I'M SORRY. 1794= THE COURT: MS. SEE, FROM HERE ON OUT, KINDLY ANSWER
1795= THE QUESTION, AND WE KNOW THAT YOU'RE READ LOTS OF DOCUMENTS, 1796= AND I DON'T WANT ANYTHING REPEATED. JUST ANSWER THE QUESTION,
1797= AND THEN WE'LL GET THROUGH WITH THIS. 1798= THE WITNESS: THANK YOU. I'LL TRY TO....
1799=
1800= BY MR. WELSH: 1801= Q. THAT BARNES & NOBLE EXPRESSED IN THESE DOCUMENTS A
1802= WILLINGNESS AND A DESIRE TO CONDUCT AUDITS IS INCONSISTENT WITH 1803= YOUR CONCLUSION THAT BARNES & NOBLE WAS MERELY DICTATING TERMS
1804= TO THE PUBLISHERS OF WHATEVER STATISTICAL RESERVE THEY WANTED, 1805= CORRECT?
1806= A. YES. 1807= Q. I'D NOW LIKE TO TURN TO A NEW SUBJECT, MS. SEE.
1808= AND WITH THE COURT'S PERMISSION, THE DOCUMENTS THAT 1809= I WANT TO REFER TO ARE IN THE NOTEBOOK, BUT BECAUSE OF THE
1810= TO-ING AND FRO-ING, WE HAVE PROVIDED THESE IN A LOOSELEAF 1811= FASHION, SO THAT THEY CAN BE VIEWED MORE EASILY.
1812= THE COURT: THANK YOU. 1813= BY MR. WELSH:
1814= Q. NOW, MS. SEE, THE FIRST DOCUMENT THAT IS IN THIS FOLDER 1815= IS --APPEARS LIKE THIS, WITHOUT ANY RED INK ON IT, AND IT
1816= BEARS THE NOTATION, "PLAINTIFFS' EXHIBIT 2547." 1817= A. I'M SORRY, THAT'S NOT THE FIRST DOCUMENT IN MY --
1818= Q. CAN YOU LOCATE THAT ONE? 1819= A. MAYBE IT'S IN THE MIDDLE. I'VE LOCATED IT.
1820= Q. OKAY. YOU'VE SEEN THIS DOCUMENT BEFORE? 1821= A. I HAVE SEEN THIS DOCUMENT.
1822= Q. OKAY. I BELIEVE YOU OFFERED SOME TESTIMONY ON THIS 1823= DOCUMENT BEFORE?
1824= A. YES, I DID. 26
26 Page 27 28
1825= Q. YES. 1826= A. YES.
1827= Q. OKAY. WHAT I'D LIKE TO DO IS TO --YOU NOTICE THAT THIS 1828= TALKS ABOUT "INGRAM TERMS COMPARISON, BARNES & NOBLE 1998."
1829= SINCE WE'RE IN THE YEAR 2001, I'D LIKE TO TRY TO UPDATE THIS A 1830= LITTLE BIT WITH YOU.
1831= MR. SPIVA: YOUR HONOR, I'M SORRY TO INTERRUPT, BUT 1832= THE INFORMATION ON THIS --ON THE CORRECTED SHEET THAT THEY'RE
1833= PROVIDING CONTAINS INFORMATION THAT IS SUBJECT TO A PROTECTIVE 1834= ORDER IN A DIFFERENT JURISDICTION, CONCERNING A DEPOSITION THAT
1835= WAS TAKEN JUST LAST WEEK. 1836= THE COURT: SO?
1837= MR. SPIVA: WELL, FIRST OF ALL, MS. SEE HAS NOT HAD 1838= THE OPPORTUNITY TO FULLY REVIEW THAT, AND SECOND OF ALL, SHE'S
1839= PREVENTED FROM FULLY ANSWERING BASED ON THAT PROTECTIVE ORDER. 1840= SHE'S PRECLUDED.
1841= THE COURT: NOT IN MY COURT SHE'S NOT. THAT WAS IN 1842= ANOTHER JURISDICTION.
1843= MR. SPIVA: I JUST WANTED TO CLARIFY YOUR HONOR WAS 1844= GIVING HER PERMISSION TO RESPOND.
1845= THE COURT: YES. 1846= MR. WELSH: THANK YOU.
1847= Q. NOW, FIRST OF ALL, MS. SEE, DID YOU PREPARE THIS DOCUMENT, 1848= PLAINTIFF'S EXHIBIT 2547?
1849= A. THE TERMS COMPARISON FOR '98?
1850= Q. YES. 1851= A. I WORKED THROUGH THIS, YES.
1852= Q. OKAY. 1853= A. OF COURSE.
1854= Q. WELL, LET'S FIRST START ON THE LEFT SIDE, HERE, UNDER 1855=" PUBLISHED TERMS." IN TRUTH, MS. SEE, WHAT YOU HAVE ON EXHIBIT
1856= 2547 ARE NOT THE PUBLISHED TERMS OFFERED BY INGRAM, ISN'T THAT 1857= TRUE?
1858= A. THE PUBLISHED TERMS OFFERED BY INGRAM? 1859= (CONTINUED ON FOLLOWING PAGE. NOTHING OMITTED.)
1860= 1861=
1862= 1863=
1864= 1865=
1866= 1867=
1868= 1869=
1870= 1871=
1872= 1873=
1874=
1875= BY MR. WELSH: 1876= Q. YES.
1877= A. I BELIEVE THOSE ARE THE PUBLISHED TERMS. 1878= Q. WELL, IN YOUR TESTIMONY, MISS SEE, FOR EXAMPLE, YOU --YOU
1879= ACKNOWLEDGE THAT INGRAM PUTS OUT BROCHURES ADVISING BOOKSELLERS 1880= OF TERMS, CORRECT?
1881= A. CORRECT. 1882= Q. AND THOSE --THOSE ARE PUBLISHED TERMS, CORRECT?
1883= A. CORRECT. 1884= Q. AND THOSE TERMS AREN'T ON PLAINTIFF'S EXHIBIT 2547, ARE
1885= THEY? 1886= A. NO, THOSE ARE, LIKE, STOCK OFFERS, SPECIAL TERMS.
1887= Q. WELL, THEY'RE NOT ALL STOCK OFFERS --1888= A. NO.
1889= Q. --AND SPECIAL TERMS, ARE THEY? 1890= A. VENDOR OF RECORD PROGRAMS.
1891= Q. THAT'S NOT A STOCK OFFER OR A SPECIAL TERM EITHER, AND IT'S 1892= A PUBLISHED TERM, ISN'T IT?
1893= A. YES, IT IS. 1894= Q. AND IT WASN'T ON YOUR EXHIBIT, WAS IT? 27
27 Page 28 29

28 Page 29 30
1965= AMOUNTS TO ABOUT AN EXTRA POINT IN DISCOUNT, CORRECT? 1966= A. YES.
1967= Q. OKAY. SO A 41 PERCENT SCHEDULED DELIVERY AND AN 1968= ADDITIONAL --AND FREE FREIGHT AMOUNTS TO THE EFFECTIVENESS OF
1969= LIKE A 42 PERCENT DISCOUNT, RIGHT? 1970= A. YES.
1971= Q. ALL RIGHT. NOW, SCHEDULED DELIVERY IS A CONCEPT THAT WE 1972= DISCUSSED YESTERDAY. REMEMBER WHEN I ASKED YOU ABOUT THE
1973= TRADEOFF BETWEEN HOW QUICKLY BOOKS ARRIVE AND WHAT THE DISCOUNT 1974= IS, AND YOU AGREED THAT THERE IS A TRADEOFF, AND SCHEDULED

1975= DELIVERY REFLECTS THAT TRADEOFF, DOESN'T IT? 1976= A. YES, IT DOES.
1977= Q. BECAUSE WHAT INGRAM DOES IS IT SAYS TO BOOKSELLERS THAT ARE 1978= WILLING TO ACCEPT A SCHEDULED DELIVERY TO GO UNDER A SCHEDULED
1979= DELIVERY PROGRAM AS OPPOSED TO BEING ABLE TO ORDER WILLY-NILLY 1980= AND JUST EXPECT TO GET THE BOOKS THE NEXT DAY, IF YOU'RE WILLING
1981= TO ORDER YOUR BOOKS AND THEN RECEIVE THE BOOKS ON A SCHEDULED 1982= BASIS, YOU WILL GET 41 PERCENT ON ALL YOUR ORDERS PLUS FREE
1983= FREIGHT, CORRECT? 1984= A. CORRECT.
1985= Q. NOW, IN ADDITION, SCHEDULED DELIVERY OFFERS AN ADDITIONAL 1986= INCENTIVE OF 1 PERCENT. WERE YOU AWARE OF THAT?
1987= A. BELIEVE THESE ARE SOME NEW TERMS, AND AS I SAID, I HADN'T 1988= HAD A CHANCE TO REVIEW --
1989= Q. OKAY. 1990= A. --ALL OF MR. CHANDLER'S DEPOSITION.
1991= Q. ALL RIGHT. WELL, AGAIN, OUR POINT HERE --1992= A. RIGHT.
1993= Q. --IS TO TRY TO UPDATE THIS A LITTLE BIT. 1994= OKAY. NOW, ARE YOU FAMILIAR WITH SUMMARY BILLING?
1995= A. UM, I AM SLIGHTLY FAMILIAR WITH SUMMARY BILLING. 1996= Q. FOR BOOKSELLERS WHO AGREE --
1997= A. RIGHT. 1998= Q. --TO TAKE SCHEDULED DELIVERY --
1999= A. RIGHT.
2000= Q. --ONE OF THE ADDITIONAL BENEFITS THEY COULD GET IS WHAT'S 2001= CALLED SUMMARY BILLING. AND SUMMARY BILLING PROVIDES A CASH
2002= DISCOUNT OF 2 PERCENT FOR PAYMENT WITHIN 25 DAYS OF THE END OF 2003= THE MONTH?
2004= A. UM-HMM. 2005= Q. NOW, TO --TO QUALIFY FOR SUMMARY BILLING, BASICALLY YOU
2006= HAVE TO HAVE GOOD CREDIT RATING, AND THEN --THEN THIS IS --2007= THIS IS MADE AVAILABLE TO YOU.
2008= AND, IN FACT, MR. CHANDLER TESTIFIED THAT A --2009= BOOKSELLERS CAN ELECT TO TAKE ON SUMMARY BILLING --
2010= MR. SPIVA: YOUR HONOR, I HAVE TO OBJECT AGAIN. HE'S 2011= CONTINUING TO DO THE SAME THING. HE'S MISCHARACTERIZING THE
2012= DEPOSITION WITHOUT PROVIDING THE CITE. 2013= MR. WELSH: MISS SEE HAS INDICATED, YOUR HONOR, THAT
2014= SHE'S REVIEWED PORTIONS OF THE CHANDLER DEPOSITION, AND SO TO 2015= THE EXTENT THAT IF SHE WILL CONFIRM THAT SHE'S READ THAT
2016= PORTION, THEN THAT'S FINE. OTHERWISE, I WILL --2017= THE COURT: ALL RIGHT. WELL, LET'S CLEAR UP THE
2018= FIRST OBJECTION. MR. PETROCELLI'S WORKING ON THAT. 2019= HAVE YOU FOUND THE PAGE AND LINE NUMBER?
2020= MR. PETROCELLI: HE'S LOOKING FOR IT, YOUR HONOR. 2021= WE'LL GET YOU THAT. THE --MR. RADER CONDUCTED THE DEPOSITION
2022= AND THE SUBSTANCE OF HIS TESTIMONY WAS THAT IT WAS OFFERED TO 2023= BOOKSELLERS --
2024= MR. SPIVA: YOUR HONOR, I'M SORRY TO --
2025= MR. DE BRUIN: JUST LET HIM FINISH. 2026= MR. SPIVA: OKAY. SORRY.
2027= MR. PETROCELLI: --250 TO 500 BOOKS PER WEEK WHO 2028= HAVE GOOD CREDIT, HAVE THE ABILITY TO ORDER BOOKS AND RECEIVE
2029= BILLS ELECTRONICALLY. THAT WAS THE SUBSTANCE, AND NOW WE'RE 2030= GETTING YOU THE CITES.
2031= MR. SPIVA: YOUR HONOR, THAT'S A SUMMARY. THAT'S NOT 2032= THE TESTIMONY.
2033= THE COURT: WELL, BEFORE THE END OF THE SESSION, 2034= COUNSEL WILL TRY AND ADVISE YOU WITH RESPECT TO WHAT THE 29
29 Page 30 31
2035= REPORTER TOOK DOWN IN THE DEPOSITION. 2036= SUMMARY USUALLY IS MADE BY A LAWYER OR A VERY GOOD
2037= LAW CLERK, AND USUALLY IT'S CORRECT IT'S BEEN MY EXPERIENCE. SO 2038= I AM NOT PARTICULARLY DETERMINED BY WHAT HAS BEEN STATED SO FAR,
2039= BUT WE'LL TRY AND GET TO THE ACTUAL PAGE AND LINE NUMBER. 2040= NOW, WHAT IS YOUR OBJECTION TO THIS ONE, WHAT WE'RE
2041= DOING NOW? 2042= MR. WELSH: I'LL REPHRASE THE QUESTION, YOUR HONOR.
2043= WE'LL JUST MOVE ON THAT WAY. 2044= THE COURT: ALL RIGHT.
2045= BY MR. WELSH: 2046= Q. I'M SORRY 'CAUSE I'M NOT SURE THE RECORD IS CLEAR. ARE YOU
2047= FAMILIAR WITH THE FACT, MISS SEE, THAT WITH SUMMARY BILLING, 2048= BOOKSELLERS WHO QUALIFY FOR SUMMARY BILLING ARE ENTITLED TO
2049= 2 PERCENT CASH DISCOUNT, 25 DAYS END OF THE MONTH?
2050= A. WAS --EXCUSE ME. WAS THE QUESTION WAS I FAMILIAR? 2051= Q. YES. WERE YOU FAMILIAR WITH THAT AS A TERM THAT IS NOW
2052= OFFERED BY INGRAM TO BOOKSELLERS WHO QUALIFY FOR SUMMARY 2053= BILLING?
2054= A. I HAD NOT BEEN FAMILIAR WITH THAT, AND I HAVE NOT HAD A 2055= CHANCE AT THE READ MR. CHANDLER'S TOTAL DEPOSITION.
2056= Q. NOW, IT'S BEEN, WHAT, 11 YEARS SINCE YOU'VE PURCHASED BOOKS 2057= FROM INGRAM?
2058= A. YES. 2059= Q. CORRECT?
2060= A. YES. 2061= Q. NOW, LET'S MOVE DOWN TO RETURNS CREDIT. WITH REGARD TO
2062= OPENING STORE AND VENDOR OF RECORD PROGRAMS OR WITH REGARD TO 2063= OPENING STORE, IT --THERE ARE PENALTY-FREE RETURNS NOW BEING
2064= PROVIDED BY INGRAM. ARE YOU AWARE OF THAT? 2065= A. I HAD NOT SEEN THAT DOCUMENT.
2066= Q. ARE YOU AWARE THAT WITH REGARD TO VENDOR OF RECORD PROGRAMS, 2067= THAT BOOKSELLERS CAN RETURN BETWEEN 5 AND 15 PERCENT OF THEIR
2068= PURCHASES PENALTY FREE? 2069= A. I WAS AWARE OF THAT, BUT --
2070= Q. ARE YOU AWARE, TOO, THAT WITH REGARD TO BOOKSELLERS WHO 2071= ELECT SUMMARY BILLING, THAT THEY ARE ENTITLED TO A SHORTAGE
2072= ALLOWANCE OF 1 PERCENT OR GREATER BASED ON HISTORICAL 2073= EXPERIENCE? YOU AWARE OF THAT?
2074= A. THAT IS A NEW TERM I'M AWARE OF.
2075= Q. OKAY. SO THESE ARE ALL --OR MOST OF THESE --I THINK THERE 2076= WAS ONE IN HERE YOU WEREN'T AWARE OF --BUT AS WE'VE GONE
2077= THROUGH THESE TERMS, THESE ARE TERMS THAT YOU ARE AWARE OF THAT 2078= ARE NOW BEING PROVIDED BY INGRAM TO BOOKSELLERS, CORRECT?
2079= A. CORRECT. 2080= Q. OKAY.
2081= THE COURT: AND WHAT DO YOU MEAN WHEN YOU SAY THIS IS 2082= A NEW TERM?
2083= THE WITNESS: I BELIEVE THESE ARE VERY RECENTLY 2084= PUBLISHED TERMS.
2085= AND YOU SEE, IT'S --EXCUSE ME. IT'S 1999-2000, AND 2086= I THINK THEY'RE PUBLISHED IN THE NEW INGRAM BROCHURES.
2087= THE COURT: ALL RIGHT. 2088= BY MR. WELSH:
2089= Q. NOW, MISS SEE, ARE YOU AWARE OF SOME ADDITIONAL PROGRAMS 2090= THAT ARE OFFERED BY INGRAM THAT ARE MENTIONED DOWN HERE, THE
2091= VISITING --2092= A. OH --
2093= Q. --AUTHOR PROGRAM. THE BACK LIST PLUS PROGRAM AND THE 2094= COMPUTER BOOKS PROGRAMS?
2095= A. I AM AWARE OF THOSE PROGRAMS. THEY'RE VERY SPECIALIZED. 2096= THE BACK LIST PLUS IS ONE THAT I WAS SAYING IS LIKE THE STOCK
2097= OFFER, AND THE COMPUTER BOOKS IS A SPECIFIC SET OF TITLES. 2098= Q. RIGHT. YES. I MEAN, AS THE TITLE INDICATES --
2099= A. RIGHT.
2100= Q. --IT IS --BUT GENERAL BOOK STORES DO, IN FACT, ORDER 2101= COMPUTER BOOKS, DON'T THEY?
2102= A. YES, THEY DO. 2103= Q. AND IT'S A GROWING AREA OF INTEREST AMONG BOOK BUYERS, WOULD
2104= YOU AGREE? 30
30 Page 31 32
2105= A. YES. 2106= Q. OKAY. SO WE'VE NOW BEEN ABLE TO UPDATE THE TERMS OFFERED BY
2107= INGRAM. NOW, LET US TRY TO UPDATE THE TERMS BETWEEN INGRAM AND 2108= BARNES & NOBLE. AND HERE, MISS SEE, I WOULD REFER YOU --
2109= (PAUSE IN THE PROCEEDINGS.) 2110= BY MR. WELSH:
2111= Q. IT'S EXHIBIT 7360. EXCUSE ME. 2112= A. OH.
2113= Q. MY CONTACTS ARE FAILING ME. 2114= THIS I WILL REPRESENT TO YOU, MISS SEE, IS THE 1999
2115= MEMORANDUM OF UNDERSTANDING BETWEEN BARNES & NOBLE AND INGRAM. 2116= A. MINE DOESN'T HAVE A EXHIBIT NUMBER ON IT.
2117= Q. WELL, IT --2118= A. I'M WITH YOU.
2119= Q. YEAH, YOU WITH ME. OKAY. I WAS CONFUSED, TOO, BUT THE 2120= FIRST FOUR NUMBERS DOWN THERE, 7360, IF YOU SEE THAT, THAT'S
2121= REFERENCING THE EXHIBIT NUMBER. OKAY. 2122= HAVE YOU EVER REVIEWED THIS DOCUMENT BEFORE?
2123= A. I HAVE REVIEWED THIS DOCUMENT. 2124= Q. OKAY. NOW, THIS DOCUMENT MAKES SIGNIFICANT CHANGES TO THE

2125= TERMS BETWEEN INGRAM AND BARNES & NOBLE AS OPPOSED TO THE TERMS 2126= THAT EXISTED IN 1998, CORRECT?
2127= A. THAT IS CORRECT. 2128= Q. OKAY. SO LET'S NOW UPDATE THE RIGHT-HAND PORTION OF THIS.
2129= ONE OF THE --AGAIN, SINCE THIS BRACKET HERE IS 2130= DEALING WITH ELECTRONIC AND OPENING STORE PURCHASES, IF YOU LOOK
2131= TO THE FIRST PAGE OF THE '99 MOU, YOU WILL SEE THAT UNDER 2132= ELECTRONIC STORE ORDERS, THAT IT --IT INDICATES --AND OPENING
2133= STORE, IT INDICATES WHO PAYS FREIGHT. DO YOU SEE THAT? 2134= A. I DO SEE THAT.
2135= Q. OKAY. AND BARNES & NOBLE PAYS THE FREIGHT, CORRECT? 2136= A. RIGHT.
2137= Q. SO WHEREAS UNDER A PROGRAM SUCH AS SCHEDULED DELIVERY, A 2138= BOOKSELLER WOULD HAVE INGRAM PAY THE FREIGHT, BARNES & NOBLE IS
2139= NOW PAYING THE FREIGHT, CORRECT? 2140= A. CORRECT.
2141= Q. AND BARNES & NOBLE RECEIVES ITS BOOKS FROM INGRAM UNDER A 2142= SCHEDULED DELIVERY, DOESN'T IT?
2143= A. I DO NOT KNOW THAT. 2144= Q. NOW, WITH REGARD TO AUDIO BOOKS, WE TURN TO PAGE 2, THE
2145= DISCOUNT ON AUDIO BOOKS HAS BEEN LOWERED FROM 46 TO 45 PERCENT. 2146= SEE THAT?
2147= A. I DO. 2148= Q. AND NOW, UNDER INCENTIVES AND REBATES, THERE'S BEEN A CHANGE
2149= HERE IN WHICH THE ADDITIONAL 1 PERCENT INCENTIVE WHICH WAS
2150= PROVIDED FOR ALL STORES WHICH USE INGRAM AS THEIR PRIMARY SOURCE 2151= OF SUPPLY WAS MODIFIED TO HOL --ONLY HOLIDAY WEST COAST
2152= REPLENISHMENT, YOU SEE THAT ON PAGE 2? 2153= A. I SEE THAT.
2154= Q. OKAY. 2155= MR. PETROCELLI: YOUR HONOR, THOSE CITATIONS FROM THE
2156= CHANDLER DEPOSITION, PAGE 174, BEGINNING LINE 21 THROUGH 176, 2157= LINE ONE, AND THEN 176, LINES 20 TO 23.
2158= THE COURT: ALL RIGHT. THANK YOU. 2159= WELL, I THINK I'LL GIVE MR. SPIVA A CHANCE TO LOOK AT
2160= THE DEPOSITION AND SATISFY HIMSELF AND MAKE SUCH PETITION TO THE 2161= COURT AS HE WISHES IN ORDER TO CORRECT ANY POSSIBLE
2162= MISUNDERSTANDING. AND WE'LL DO THAT AFTER THE RECESS. 2163= THE COURT IS NOW IN RECESS.
2164= THE CLERK: ALL RISE. 2165= (RECESS TAKEN AT 11: 21 A. M.)
2166= (PROCEEDINGS RESUMED AT 11: 45 A. M.) 2167= THE COURT: FURTHER CROSS-EXAMINATION. YOU MAY
2168= PROCEED, MR. WELSH. 2169= MR. WELSH: THANK YOU, YOUR HONOR.
2170= Q. MISS SEE. 2171= OKAY. I'D LIKE YOU TO GO TO OUR BINDER, PLEASE.
2172= AND --2173= A. EXCUSE ME.
2174= Q. --TURN TO THE EXHIBIT THAT IS MARKED 6368. 31
31 Page 32 33
2175= A. UNDER WHAT TAB? 2176= Q. IT'S --ACTUALLY IT SAYS TAB 6368.
2177= A. OH, I'M SORRY. 2178= Q. IT'S IN THE BACK.
2179= A. 6-3-6-7, 6-8. 2180= Q. OKAY.
2181= (PAUSE IN THE PROCEEDINGS.) 2182= THE COURT: MR. WELSH, WHAT IS IT AGAIN?
2183= MR. WELSH: I'M SORRY, YOUR HONOR. IT IS 6368. IT'S 2184= AT THE VERY BACK, AND --IN OUR BINDER, WE HAD TABS THAT RAN 1
2185= THROUGH 15, AND THEN --WHICH WERE DOCUMENTS --2186= THE COURT: NO, I GOT IT.
2187= MR. WELSH: OKAY. 2188= THE COURT: THANK YOU.
2189= (PAUSE IN THE PROCEEDINGS.) 2190= MR. WELSH: APOLOGIZE, YOUR HONOR, THAT CLIP SHOULD
2191= NOT HAVE BEEN IN THERE. 2192= THE COURT: YOU'RE RIGHT.
2193= OKAY. 2194= BY MR. WELSH:
2195= Q. MISS SEE, ARE YOU FAMILIAR WITH THIS DOCUMENT ENTITLED 2196= INGRAM BOOK COMPANY SUMMARY BILLING PROGRAM?
2197= A. I HAVE NOT SEEN THIS DOCUMENT. 2198= Q. OKAY.
2199= YOU INDICATED, I BELIEVE, YOU HAD SOME UNDERSTANDING
2200= OF SUMMARY BILLING? 2201= A. YES, I DO.
2202= Q. OKAY. ALL RIGHT. AND IS YOUR UNDERSTANDING OF SUMMARY 2203= BILLING CONSISTENT WITH THE TERMS SET FORTH HERE?
2204= A. (REVIEWING DOCUMENT.) 2205= YES.
2206= Q. OKAY. AND --AND SUMMARY BILLING DOES NOT HAVE ANY MINIMUM 2207= ORDER REQUIREMENTS; IS THAT YOUR UNDERSTANDING?
2208= A. (REVIEWING DOCUMENT.) 2209= THAT'S CORRECT.
2210= Q. OKAY. AND IT'S LIKEWISE YOUR UNDERSTANDING THAT --THAT 2211= EXHIBIT 6368 IS A --IS A BROCHURE THAT INGRAM PROVIDES TO --TO
2212= BOOKSELLERS? IN OTHER WORDS, THIS WOULD BE PART OF INGRAM'S 2213= PUBLISHED TERMS?
2214= A. I HAVE NOT SEEN THIS AS A PUBLISHED TERM. 2215= Q. BUT IT'S CERTAINLY A PUBLISHED SCHEDULE OF A PARTICULAR
2216= PROGRAM, CORRECT? 2217= A. I DON'T --I DO NOT BELIEVE IT IS GENERALLY PUBLISHED AS IT
2218= WOULD BE IN A TERMS BROCHURE. AS I RECALL --I --2219= Q. UM, LET'S TURN BACK TO THE DOCUMENT IMMEDIATELY PRECEDING
2220= EXHIBIT 6368 THAT'S BEEN MARKED AS EXHIBIT 63 --6356. 2221= A. (REVIEWING DOCUMENTS.)
2222= Q. THIS IS THE INGRAM BACKLIST PLUS PROGRAM? 2223= A. YES.
2224= Q. ALL RIGHT. YOU'VE SEEN THIS DOCUMENT BEFORE?
2225= A. NO, I HAVE NOT SEEN THIS DOCUMENT. 2226= Q. DO YOU HAVE AN UNDERSTANDING THAT --THAT THIS IS PART OF
2227= THE --OF THE PUBLISHED TERMS --2228= A. YES.
2229= Q. --MADE AVAILABLE BY INGRAM? 2230= A. YES, I HAVE SEEN THIS. THIS IS COMPARABLE TO A STOCK OFFER.
2231= Q. NOW, WHEN YOU SAY --LET'S SEE. I'M SORRY. 2232= MOVING ON TO EXHIBIT 6376, THIS IS THE INGRAM VENDOR
2233= OF RECORD PROGRAM. 2234= A. YES.
2235= Q. OKAY. AND IF YOU TURN TO PAGE 2 OF THIS DOCUMENT, IT 2236= INDICATES THE DISCOUNT AVAILABLE, 42 PERCENT WITH 43 PERCENT ON
2237= 10 OR MORE UNITS OR TITLES. 2238= A. YES.
2239= Q. OKAY. SAYS 5 PERCENT --ON RETURNS, IT SAYS 5 PERCENT OF 2240= VOR PURCHASES RETURNABLE PENALTY FREE?
2241= A. YES. 2242= Q. OKAY. AND, AGAIN, NONE OF THESE TERMS THAT WE FIND IN THE
2243= VENDOR OF RECORD PROGRAM ARE FOUND IN THE RED BOOK, CORRECT? 2244= A. OH, THAT IS CORRECT.
2245= Q. YEAH, AND NONE OF THE TERMS THAT WE SAW WITH REGARD TO 32
32 Page 33 34
2246= SUMMARY --THIS SUMMARY BILLING PROGRAM OFFERED BY INGRAM IS SET 2247= FORTH IN THE RED BOOK, CORRECT?
2248= A. THAT IS CORRECT. 2249= Q. LET'S TURN TO THE NEXT DOCUMENT, 6377.

2250= A. (REVIEWING DOCUMENTS.) 2251= Q. THIS IS THE OPENING STORE PROGRAM, CORRECT?
2252= A. THIS IS THE ROSI PROGRAM. 2253= Q. THE ROSI, R-O-S-I?
2254= A. YES. IT IS. 2255= Q. OKAY.
2256= A. IT'S RECOMMENDED OPENING STORE INVENTORY, I BELIEVE. 2257= Q. YES, THAT IS CORRECT. THIS IS A --THIS IS AN INGRAM
2258= PROGRAM YOU'RE FAMILIAR WITH? 2259= A. VERY FAMILIAR.
2260= Q. CORRECT? VERY FAMILIAR. BUT THAT VERY FAMILIAR PROGRAM IS 2261= NOT STATED IN THE RED BOOK?
2262= A. BUT THIS VERY FAMILIAR PROGRAM IS FOR A STORE WHEN THEY 2263= OPEN. AND IT IS NOT PUT IN THE RED BOOK, CORRECT.
2264= Q. NOW, UNDER THE ROSI PROGRAM, IT SAYS THAT ROSI ORDERS OF 2265= MORE THAN 50,000 WHOLESALE CAN EARN A FLAT 42 PERCENT?
2266= A. EXCUSE ME. OH, I FOUND IT. 2267= Q. OKAY. I'M SORRY. IT'S --
2268= A. THAT'S OKAY. 2269= Q. --BURIED IN PAGE 2.
2270= A. RIGHT. 2271= Q. IN THE FAR RIGHT COLUMN ABOUT TWO-THIRDS OF THE WAY DOWN
2272= UNDER THE --2273= A. YES.
2274= Q. --UNDER THE HEADING OF MAXIMUM DISCOUNTS. IT THEN GOES
2275= DOWN AND SAYS A FLAT 42 PERCENT? 2276= A. UM-HMM.
2277= Q. CORRECT? 2278= A. CORRECT.
2279= Q. NOW, I THINK YOU MENTIONED THAT THE SCHEDULED DELIVERY WAS A 2280= PROGRAM YOU WERE NOT FAMILIAR WITH.
2281= A. THAT IS CORRECT. 2282= Q. THAT IS CORRECT. OKAY.
2283= A. I BELIEVE IT'S A NEW PROGRAM. 2284= Q. ARE YOU AWARE THAT --THAT THIS PROGRAM IS AT LEAST KNOWN TO
2285= SOME OF THE PLAINTIFFS? 2286= A. I AM AWARE OF THAT.
2287= Q. OKAY. SO APPARENTLY, IT --THE WORD IS GETTING OUT. FOR 2288= EXAMPLE, ARE YOU AWARE THAT CHANGING HANDS HAS BEGAN TO
2289= PARTICIPATE IN THE SCHEDULED DELIVERY PROGRAM? 2290= A. I AM AWARE OF THAT.
2291= Q. OKAY. AND YOU WERE HERE WHEN MR. ROSS TESTIFIED. DO YOU 2292= RECALL HIM SAYING THAT HE HAD BEEN OFFERED THE SCHEDULED
2293= DELIVERY PROGRAM, BUT --BY INGRAM BUT HAD ELECTED NOT TO TAKE 2294= IT?
2295= A. RIGHT. 2296= Q. OKAY. NOW, WITH REGARD TO SCHEDULED DELIVERY, DO YOU HAVE
2297= AN UNDERSTANDING THAT --THAT THERE IS A REQUIREMENT OF --OF 2298= PURCHASING BETWEEN 250 AND 500 BOOKS, AND ALSO A REQUIREMENT OF
2299= BEING CREDITWORTHY?
2300= A. YES. 2301= Q. OKAY.
2302= A. EXCUSE ME? I THOUGHT THAT THE CREDITWORTHY WAS FOR THE 2303= SUMMARY BILLING.
2304= Q. I BELIEVE --WELL, WE CAN --AGAIN, I'M HAPPY TO GO TO THE 2305= DEPOSITION TESTIMONY OF MR. CHANDLER.
2306= A. EXCUSE ME. I WAS --I WAS ONLY POINTING OUT YOU HAD ASKED 2307= ABOUT SCHEDULED DELIVERY BEING CREDITWORTHY AND I THOUGHT THAT
2308= THE SUMMARY BILLING WAS WHERE THE CREDITWORTHINESS --2309= Q. WELL, DO YOU HAVE AN UNDERSTANDING THAT SUMMARY BILLING IS A
2310= PART OF THE SCHEDULED DELIVERY PROGRAM? 2311= A. THANK YOU.
2312= Q. OKAY. IS THAT --2313= A. CLARIFIES.
2314= Q. ARE WE CLEAR ON THAT NOW? 2315= A. CLEAR. 33
33 Page 34 35
2316= Q. OKAY. GREAT. 2317= I TAKE IT, THEN, MISS SEE, FROM ALL THAT WE'VE
2318= EXAMINED, THERE'S NO DISPUTE THAT THE RED BOOK DOES NOT CONTAIN 2319= ALL THE TERMS AND PROGRAMS BEING OFFERED BY PUBLISHERS, DOES IT?
2320= A. NO, THERE ARE OTHER PUBLISHED TERMS. 2321= Q. AND BOOKSELLERS WOULD BE WELL ADVISED, IF THEY WANTED TO
2322= LEARN ALL OF THE TERMS AND PROGRAMS ON AN UPDATED BASIS, EXACTLY 2323= WHAT WAS OUT THERE IN THE MARKETPLACE, THEY SHOULD CONSULT OTHER
2324= SOURCES BESIDES SIMPLY THE RED BOOK, CORRECT?
2325= A. YES. 2326= MR. WELSH: OKAY. I HAVE NO FURTHER QUESTIONS AT
2327= THIS TIME. 2328= THE COURT: MR. STEER.
2329= MR. STEER: THANK YOU, YOUR HONOR. 2330= PLEASE GIVE ME A MOMENT TO ORGANIZE OUR MATERIALS.
2331= (PAUSE IN THE PROCEEDINGS.) 2332= MR. STEER: SALLY, WOULD YOU KINDLY PASS THIS UP TO
2333= HIS HONOR. 2334= (PAUSE IN THE PROCEEDINGS.)
2335= (CONTINUED NEXT PAGE; NOTHING OMITTED.) 2336=
2337= 2338=
2339= 2340=
2341= 2342=
2343= 2344=
2345= 2346=
2347= 2348=
2349=
2350= THE COURT: ALL RIGHT, YOU MAY PROCEED. 2351= MR. STEER: THANK YOU, YOUR HONOR.
2352= CROSS-EXAMINATION 2353= BY MR. STEER:
2354= Q. GOOD MORNING, MS. SEE. 2355= A. GOOD MORNING.
2356= Q. HOW ARE YOU? 2357= A. I AM A LITTLE WEARIED.
2358= Q. IT'S UNDERSTANDABLE. LET ME GO BACK TO SOME OF YOUR 2359= EARLIER TESTIMONY.
2360= YOU'VE TESTIFIED A LITTLE BIT ABOUT EXCLUSIVE STOCK 2361= OFFERS THIS MORNING, AND I WANT TO CLEAR SOMETHING UP. WHEN
2362= YOU DID THAT, YOU REFERRED TO THE DEFENDANTS. IT IS TRUE, IS 2363= IT NOT, THAT YOU SAW NO EVIDENCE THAT MY CLIENTS, BORDERS AND
2364= WALDEN BOOKS, RECEIVED STOCK OFFERS THAT WERE EXCLUSIVE TO 2365= THEM?
2366= A. WHEN I WAS TALKING THIS MORNING, I WAS TALKING ABOUT STOCK 2367= OFFERS THAT WERE MADE GENERALLY AVAILABLE AND HAD DIFFERENT
2368= TERMS FOR BARNES & NOBLE, AND I'M GOING TO HAVE TO REFRESH MY 2369= MEMORY IN ORDER TO ANSWER YOUR QUESTION.
2370= Q. I APPRECIATE THAT. YOUR POINT THIS MORNING WAS THAT YOU 2371= WERE REFERRING TO BARNES & NOBLE, CORRECT?
2372= A. CORRECT. 2373= Q. BUT YOU USED THE WORD "DEFENDANTS," AND I WANTED TO MAKE
2374= SURE THAT AS FAR AS YOUR TESTIMONY THIS MORNING WAS CONCERNED,
2375= THAT PHRASE DID NOT INCLUDE MY CLIENTS; ISN'T THAT CORRECT? 2376= A. AS FAR AS MY TESTIMONY THIS MORNING, IT DID NOT INCLUDE
2377= YOUR CLIENTS. 2378= Q. THANK YOU. NOW, YOU ALSO TESTIFIED ABOUT ANOTHER MATTER
2379= WHERE YOU TALKED ABOUT THE DEFENDANTS. YOU TALKED ABOUT 2380= BORDERS AND WALDEN BOOKS, AND THAT HAD TO DO WITH STATISTICAL
2381= RESERVES, OR WHAT WALDEN BOOK COMPANY CALLS ITS R. O. G. PROGRAM. 2382= DO YOU REMEMBER THAT?
2383= A. I DID. 2384= Q. NOW, YOU UNDERSTAND, OF COURSE, THAT THAT PROGRAM IS A
2385= PROGRAM THAT IS OFFERED AND REQUESTED BY WALDEN BOOKS ONLY AND 34
34 Page 35 36
2386= NOT BY BORDERS BOOKS & MUSIC. 2387= A. I UNDERSTAND. THANK YOU FOR THE CLARIFICATION.
2388= Q. OKAY, I JUST WANT THE RECORD TO BE CLEAR. AND YOU ALSO 2389= UNDERSTAND THAT IT IS OPTIONAL FOR VENDORS. VENDORS DO NOT
2390= HAVE TO AGREE TO PARTICIPATE IN THE R. O. G. PROGRAM, CORRECT? 2391= A. RIGHT. I SAW EVIDENCE OF THAT.
2392= Q. NOW, THE WAY THE R. O. G. PROGRAM WORKS --YOU CAN CORRECT ME 2393= IF I'M WRONG, BUT I'M GOING TO LEAD YOU THROUGH IT HERE, JUST
2394= TO EXPEDITE THE TESTIMONY --IS THAT EACH YEAR FOR A VENDOR 2395= THAT AGREES TO BE PART OF THE PROGRAM, WALDEN BOOKS AND THE
2396= VENDOR SELECT 50 WALDEN STORES, AND THOSE --I'M SORRY, LET ME 2397= CORRECT MYSELF. WALDEN BOOKS AND ITS ACCOUNTANTS, ITS BIG FIVE
2398= ACCOUNTING FIRM, SELECT 50 WALDEN BOOKS STORES FOR WHICH THEY 2399= DO DETAILED RECEIVING. DO YOU UNDERSTAND THAT?

2400= A. YES, I DO REMEMBER THAT. 2401= Q. SO IT ISN'T DONE JUST BY WALDEN BOOKS ALONE.
2402= A. YES. 2403= Q. AND DETAILED RECEIVING MEANS WHAT? CAN YOU EXPLAIN TO THE
2404= COURT WHAT THAT MEANS? 2405= A. DETAILED RECEIVING WOULD MEAN THE KIND OF RECEIVING I HAD
2406= DESCRIBED BEFORE, WHERE YOU TAKE YOUR --YOU RECEIVE YOUR 2407= ORDER, AND YOU MATCH IT AGAINST YOUR PURCHASE ORDER, YOUR
2408= INVOICE. 2409= Q. JUST THE WAY YOU DID IT WHEN YOU WERE OPERATING YOUR OWN
2410= STORE, RIGHT? 2411= A. CORRECT.
2412= Q. AND USING THE RESULTS OF WHAT THEY FOUND IN THOSE 50 2413= STORES, THEY DO A STATISTICAL ANALYSIS WHICH THEY AGREE WITH
2414= THE PUBLISHER WILL APPLY FOR THE COMING YEAR OR OTHER 2415= APPLICABLE PERIOD OF TIME, ISN'T THAT CORRECT?
2416= A. THAT'S CORRECT. 2417= Q. NOW, I BELIEVE YOU TESTIFIED THAT WHEN YOU WERE ACTIVE IN
2418= THE ABA, YOU THOUGHT THAT THIS KIND OF ARRANGEMENT WOULD BE A 2419= BENEFICIAL ONE TO BOOKSELLERS.
2420= A. I THOUGHT IT WOULD BE VERY BENEFICIAL TO THE WHOLE 2421= INDUSTRY, ALL BOOKSELLERS.
2422= Q. AND IT WOULD NOT JUST BE BENEFICIAL TO BOOKSELLERS. 2423= THERE'S ALSO AN ARGUMENT, ISN'T THERE, THAT THE PUBLISHERS
2424= WOULD SAVE MONEY IF THEY ADOPTED THIS KIND OF APPROACH TO
2425= ACCOUNTING FOR SHORTAGES AND DAMAGED BOOKS, ISN'T THAT RIGHT? 2426= A. CORRECT.
2427= Q. AND YOU MADE THAT ARGUMENT WHEN YOU WERE WITH THE ABA, 2428= DIDN'T YOU?
2429= A. CORRECT. 2430= Q. OKAY. SO TO THE EXTENT THAT PUBLISHERS ARE REFUSING TO GO
2431= TO THIS, DO YOU HAVE ANY EXPLANATION FOR WHY THEY DON'T GO TO 2432= THIS VERY LOGICAL AND REASONABLE PROGRAM?
2433= A. NO, I DON'T. I THINK IT'S JUST DIFFICULT FOR PUBLISHERS TO 2434= MAKE CHANGES.
2435= Q. THEY'RE KIND OF STUCK BACK IN TIME, RIGHT? 2436= A. WELL --
2437= Q. SOME OF THEM, ANYWAY. YOU MENTIONED EARLIER, UNDER 2438= QUESTIONING, I BELIEVE, BY YOUR COUNSEL, THAT YOU RECALL THAT
2439= ST. MARTIN'S PRESS DOES PUBLISH THE FACT THAT IT WILL AGREE TO 2440= A STATISTICAL RESERVE OF A CERTAIN PERCENTAGE, CORRECT?
2441= A. CORRECT. 2442= Q. AND IT'S BEEN PUBLISHING THAT --THAT FACT HAS APPEARED IN
2443= THE ABA'S RED BOOK OR HANDBOOK FOR A NUMBER OF YEARS, ISN'T 2444= THAT CORRECT?
2445= A. YES, THAT IS CORRECT. 2446= Q. ISN'T IT ALSO TRUE THAT IT'S BEEN KNOWN THAT SOME OTHER
2447= PUBLISHERS, EVEN THOUGH THEY DON'T PUBLISH THE TERM IN THE ABA 2448= HANDBOOK, HAVE STATED PUBLICLY, INCLUDING AS SET FORTH IN OTHER
2449= ABA PUBLICATIONS, THAT THEY WILL MAKE THAT PROVISION AVAILABLE
2450= TO BOOKSELLERS? 2451= A. I HAVE NOT SEEN THAT IN WRITING.
2452= Q. NOW, SO THAT WE'RE SPECIFIC AND WE UNDERSTAND THE SCOPE OF 2453= WHAT WE'RE TALKING ABOUT HERE WITH RESPECT TO MY CLIENTS --
2454= A. RIGHT. 2455= Q. --BORDERS, YOU UNDERSTAND, DOES NOT HAVE A STATISTICAL 35
35 Page 36 37
2456= RESERVE PROGRAM, RIGHT? 2457= A. CORRECT, YES.
2458= Q. AND WALDEN DOES, BECAUSE PART OF WALDEN'S DELIVERIES OF 2459= BOOKS ARE SENT STRAIGHT TO THE STORES, ISN'T THAT CORRECT?
2460= A. YES, THEY'RE DROP SHIPPED. 2461= Q. YOU UNDERSTAND THAT FOR BORDERS VIRTUALLY A HUNDRED PERCENT
2462= OF THE BOOKS THEY PURCHASE ARE SENT TO THE RETAIL DISTRIBUTION 2463= CENTERS?
2464= A. I UNDERSTAND. 2465= Q. AND AT THE RETAIL DISTRIBUTION CENTERS THEY DO DETAILED
2466= RECEIVING, RIGHT? 2467= A. YES.
2468= Q. JUST THE WAY YOU DID. 2469= A. RIGHT.
2470= Q. OKAY. AND AT WALDEN'S, ABOUT 65 PERCENT --YOU'VE SEEN THE 2471= EVIDENCE, HAVEN'T YOU, THE TESTIMONY --
2472= A. UM-HUM. 2473= Q. --THAT ABOUT 65 PERCENT OF WALDEN'S BOOK PURCHASES COME
2474= THROUGH THE WALDEN DISTRIBUTION CENTERS, CORRECT?
2475= A. CORRECT. 2476= Q. OKAY, AND SO FOR THOSE DELIVERIES, THERE'S NO NEED FOR A
2477= STATISTICAL RESERVE. IT IS --THAT ALSO IS DONE BY DETAILED 2478= RECEIVING, CORRECT?
2479= A. YES. 2480= Q. AND THAT'S BECAUSE OF THE DISTRIBUTION CENTERS, WALDEN AND
2481= BORDERS HAVE TO ACCOUNT FOR EVERY SINGLE BOOK, BECAUSE WHEN 2482= THEY COME IN, THEY ARE THEN SOON SENT OUT TO A TOTAL OF ABOUT
2483= 12 OR 1300 STORES, RIGHT? 2484= A. RIGHT.
2485= Q. SO THIS PROGRAM, INSOFAR AS MY CLIENTS ARE INVOLVED IN IT, 2486= IS LIMITED TO THE APPROXIMATELY 35 PERCENT OF WALDEN PURCHASES
2487= THAT COME THROUGH THE STORES, RIGHT? 2488= A. YES.
2489= Q. EXCEPT THAT IT ISN'T 35 PERCENT, IT'S ONLY FOR THE 2490= PUBLISHERS THAT AGREE TO PARTICIPATE IN IT, CORRECT?
2491= A. CORRECT. 2492= Q. AND YOU HAVEN'T DONE ANY STUDY TO DETERMINE, OF THAT 35
2493= PERCENT OF WALDEN BOOK PURCHASES, WHAT PROPORTION ARE ACCOUNTED 2494= FOR BY PUBLISHERS WHO HAVE AGREED TO PARTICIPATE IN THE R. O. G.
2495= PROGRAM. 2496= A. NO, I HAVE NOT DONE SUCH AN ANALYSIS.
2497= Q. NOW, TO THE EXTENT THAT WALDEN.... 2498= PARDON ME. THE TIME OF YEAR, I'M STARTING TO HAVE
2499= ALLERGIES. I APOLOGIZE FOR ALL THIS CONGESTION.
2500= TO THE EXTENT THAT WALDEN BOOKS IS ABLE TO RECEIVE 2501= R. O. G. TERMS, OR ENTER INTO R. O. G. AGREEMENTS WITH PUBLISHERS
2502= THAT PUBLICLY ANNOUNCE THEIR WILLINGNESS TO DO SO, ISN'T IT 2503= PROPER FOR WALDEN BOOKS TO GO TO OTHER PUBLISHERS AND SAY, YOU
2504= KNOW, THIS IS REALLY A GOOD IDEA, AND YOU REALLY OUGHT TO MEET 2505= THE COMPETITION OF ST. MARTIN'S AND ANY OTHERS WHO HAVE
2506= PUBLICLY ANNOUNCED THEIR WILLINGNESS TO DO THIS? 2507= A. YES, IF THOSE, THEN, MEETING THE COMPETITION IS APPLIED TO
2508= EVERYBODY IN THE INDUSTRY. 2509= Q. IT WOULD BE A GOOD THING, FROM YOUR PERSPECTIVE, AND FROM
2510= THE PERSPECTIVE OF WHAT YOU'VE CALLED INDEPENDENT BOOKSELLERS, 2511= IF WALDEN WERE TO SUCCEED IN CONVINCING MORE AND MORE
2512= PUBLISHERS TO OFFER THE R. O. G. PROGRAM, AND TO OFFER IT 2513= GENERALLY, ISN'T THAT TRUE?
2514= A. I WOULD CONCEDE THAT IT WOULD BE AN ADVANTAGE FOR EVERYBODY 2515= IN THE INDUSTRY TO HAVE THESE, WHAT YOU CALL R. O. G.
2516= Q. YOU ALSO TESTIFIED YESTERDAY ABOUT THE ADVANTAGES OF WHAT 2517= YOU CALLED JUST-IN-TIME ORDERING. I GUESS THAT PHRASE CAME
2518= INTO --IN VOGUE BACK IN THE EARLY 1980'S WHEN TOYOTA WAS 2519= BEATING THE PANTS OFF DETROIT, USING IT, AND CROWING ABOUT ITS
2520= JUST-IN-TIME INVENTORY MANAGEMENT, AND I GUESS THAT IT'S BEEN 2521= ADOPTED IN WIDESPREAD WAYS.
2522= DID YOU DO YOUR BEST TO ADHERE TO JUST-IN-TIME 2523= ORDERING WHEN YOU RAN YOUR STORE?
2524= A. I DID, AND IT BECAME MUCH MORE FEASIBLE WITH THE ADVENT OF
2525= COMPUTERS AND BETTER INVENTORY CONTROL SYSTEMS. 36
36 Page 37 38
2526= Q. THE COMPANY, OR THE BOOKSELLING BUSINESS, THAT HAS THE 2527= TECHNOLOGICAL EDGE IN JUST-IN-TIME ORDERING WOULD HAVE A
2528= SIGNIFICANT COMPETITIVE ADVANTAGE IN THE MARKETPLACE, WOULD IT 2529= NOT?
2530= A. YES. 2531= Q. WHEN YOU RAN YOUR STORE, DID THE COMPUTER SYSTEM THAT YOU
2532= USED HAVE PREDICTIVE CAPABILITY? 2533= A. YES.
2534= Q. IN OTHER WORDS, DID IT HAVE THE ABILITY TO LEARN FROM WHAT 2535= YOU ORDERED?
2536= A. YES. 2537= Q. AND PREDICT WHAT YOU OUGHT TO ORDER?
2538= A. CORRECT. 2539= Q. AND YOU FOUND THAT TO BE USEFUL?
2540= A. YES. 2541= Q. IT GAVE YOU AN ADVANTAGE IN OPERATING YOUR BOOKSTORE,
2542= CORRECT? 2543= A. YES.
2544= Q. AND HELPED TO MAKE IT MORE PROFITABLE, RIGHT? 2545= A. YES.
2546= Q. LET'S TURN TO THE CARTON QUANTITY ISSUE BRIEFLY. I'D LIKE 2547= YOU TO LOOK BACK AT TAB NUMBER 8 OF THE PLAINTIFFS' SET OF
2548= EXHIBITS THAT WAS PROVIDED TO YOU THIS MORNING. THAT CONTAINS 2549= A LETTER FROM ROBIN WAGNER OF BORDERS TO STEVE LEWERS OF

2550= HOUGHTON MIFFLIN COMPANY. 2551= A. CORRECT.
2552= Q. I'LL GIVE YOU AND HIS HONOR A MOMENT TO FIND IT AND THEN 2553= EMBARK ON THIS PATH.
2554= THE COURT: WHAT TAB IS IT? EIGHT? 2555= MR. STEER: TAB 8, YOUR HONOR.
2556= Q. MS. SEE, HAVE YOU HAD A CHANCE TO LOOK BACK AT THE 2557= DOCUMENT?
2558= A. YES, I HAVE. 2559= Q. NOW, I NOTE THAT IT'S A JANUARY 5, 1995 LETTER FROM
2560= MR. WAGNER OF BORDERS TO HOUGHTON MIFFLIN COMPANY, AND HOUGHTON 2561= MIFFLIN COMPANY, SO THE RECORD IS CLEAR, IS A SUBSTANTIAL
2562= PUBLISHER, ISN'T IT? 2563= A. YES, IT IS.
2564= Q. AND YOU'LL SEE IN THE FIRST LINE MR. WAGNER WRITES, 2565= "I AM GLAD WE HAD THE OPPORTUNITY TO FURTHER
2566= DISCUSS THE PROPOSED HOUGHTON RETAIL SALES POLICIES 2567= ON TUESDAY."
2568= AND THEN HE EXPRESSES IN THE NEXT LINE HIS DISTRESS ABOUT 2569= CERTAIN ISSUES.
2570= NOW, IS IT FAIR TO CHARACTERIZE THIS AS A 2571= NEGOTIATING LETTER?
2572= A. NEGOTIATION IS A TERM I WOULD NOT USE. IT'S A CONVERSATION 2573= LETTER.
2574= Q. IN WHICH MR. WAGNER IS SETTING FORTH HIS VIEWS AS TO HOW
2575= HOUGHTON OUGHT TO STRUCTURE ITS SALES TERMS, CORRECT? 2576= A. CORRECT.
2577= Q. HE HAS AN ABSOLUTE RIGHT TO DO THAT, DOESN'T HE? 2578= A. YES, HE DOES.
2579= Q. YOU DON'T QUARREL WITH HIS RIGHT TO DO THAT. 2580= A. NO.
2581= Q. FROM YOUR PERSPECTIVE, THERE WAS ABSOLUTELY NOTHING WRONG 2582= WITH MR. WAGNER'S WRITING THIS LETTER TO MR. LURES AT HOUGHTON
2583= MIFFLIN, RIGHT? 2584= A. THERE'S NOTHING WRONG WITH TRYING TO GET THE BEST POSSIBLE
2585= TERMS, AS LONG AS THEY ARE AVAILABLE TO EVERYBODY. 2586= Q. NOW, IN THE FIRST FULL PARAGRAPH, THE ONE THAT TALKS ABOUT
2587= CARTON QUANTITY RESTRICTION, TOWARD THE END, MR. WAGNER WRITES, 2588= AND I'LL QUOTE,
2589= "ALL MAJOR PUBLISHERS (INCLUDING RANDOM HOUSE, 2590= SIMON & SCHUSTER, LITTLE BROWN, ET CETERA) HAVE
2591= RECOGNIZED THAT SUCH RESTRICTIONS ARE ANATHEMA TO 2592= OUR EFFICIENT ORDERING PRACTICES."
2593= HE ADDS THAT, 2594= "THESE PUBLISHERS HAVE BEEN FLEXIBLE ON THIS
2595= ISSUE BY OFFERING 2 PERCENT ADDITIONAL ON RDC ORDERS 2596= WITHOUT ENFORCING CARTON QUANTITY ORDERING," 37
37 Page 38 39
2597= AND THEN HE SAYS, "HOUGHTON MUST DO THE SAME." 2598= DO YOU KNOW WHETHER HOUGHTON DID THE SAME?
2599= A. YES, I DO. I SAW THE LETTER BACK FROM STEVE TO MR. WAGNER.
2600= Q. AND HOUGHTON SAID, YOU'RE RIGHT, WE'LL DO THAT? 2601= A. SAID, WE'LL DO THAT. HE AGREED.
2602= Q. THEY AGREED. NOW, IN YOUR --LET ME DIVERGE A LITTLE BIT 2603= HERE AND ASK YOU A FEW QUESTIONS ABOUT YOUR UNDERSTANDING OF
2604= YOUR RESPONSIBILITY IN ACTING AS AN EXPERT WITNESS IN THIS 2605= LAWSUIT.
2606= WOULD YOU TELL ME, AND TELL THE COURT, PLEASE, WHAT 2607= YOU UNDERSTOOD TO BE YOUR JOB, YOUR ROLE.
2608= A. WELL, I DON'T HAVE MY REPORT HERE, SO I CAN'T QUOTE IT 2609= EXACTLY, BUT I WAS ASKED TO EVALUATE, TO MAKE AN OPINION, ON
2610= WHETHER THE --FROM THE EVIDENCE THAT I SAW, WHETHER THE 2611= DEFENDANTS WERE GETTING TERMS THAT WERE DIFFERENT FROM THE
2612= PUBLISHED TERMS THAT ARE GENERALLY AVAILABLE IN THE BOOK 2613= INDUSTRY.
2614= Q. ALL RIGHT. YOU SAY, THE PUBLISHED TERMS THAT ARE GENERALLY 2615= AVAILABLE IN THE BOOK INDUSTRY, AND AT THE VERY LEAST, THAT
2616= WOULD REQUIRE A REVIEW OF THE ABA'S HANDBOOKS, RIGHT? 2617= A. CORRECT.
2618= Q. AND IT WOULD ALSO REQUIRE A REVIEW OF OTHER PUBLISHED FORMS 2619= OF PRICE AND TERM ANNOUNCEMENTS FROM PUBLISHERS AND OTHER
2620= VENDORS, WOULDN'T IT? 2621= A. YES.
2622= Q. DID YOU LOOK TO SEE WHETHER IN 1995, WHEN MR. WAGNER WROTE 2623= HIS LETTER, OTHER MAJOR PUBLISHERS WERE OFFERING RETAIL
2624= DISTRIBUTION CENTER TERMS THAT DID NOT REQUIRE CARTON QUANTITY
2625= ORDERING? 2626= A. THERE ARE, AS I TESTIFIED YESTERDAY, THERE ARE PUBLISHERS
2627= WHO DO NOT REQUIRE, BUT MOST PUBLISHERS REQUIRE CARTON 2628= QUANTITIES. IT IS ONE OF THE FOUR REQUIREMENTS THAT IS MOST
2629= OFTEN ENFORCED. 2630= Q. ALL RIGHT. AMONG THE PUBLISHERS THAT YOU KNOW DO NOT
2631= REQUIRE CARTON QUANTITY ARE HARPER-COLLINS, IS THAT CORRECT? 2632= A. THIS IS A MEMORY TEST.
2633= Q. NO, IT'S NOT INTENDED TO BE A MEMORY TEST. MS. SEE, IF YOU 2634= DON'T REMEMBER --
2635= A. I DON'T REMEMBER. 2636= Q. FOR PURPOSES OF MY EXAMINATION, I ASK YOU TO ASSUME THAT,
2637= AS A HYPOTHETICAL, THAT HARPER COLLINS, IN 1995, DID NOT 2638= REQUIRE CARTON QUANTITIES ON SHIPMENTS TO RETAIL DISTRIBUTION
2639= CENTERS. CAN YOU DO THAT? 2640= A. I CAN ACCEPT YOUR STATEMENT.
2641= Q. ALL RIGHT. DO YOU RECALL WHETHER HARCOURT --HARCOURT 2642= BRACE IT USED TO BE CALLED --HAD A CARTON QUANTITY REQUIREMENT
2643= IN 1995, OR NOT? 2644= A. I'M TRYING TO THINK. I DON'T THINK THEY DID.
2645= Q. WELL, I'LL ONCE AGAIN ASK YOU TO ACCEPT MY REPRESENTATION 2646= AS A HYPOTHETICAL THAT THEY DID NOT REQUIRE CARTON QUANTITY.
2647= AND FINALLY, DO YOU KNOW WHETHER LITTLE BROWN, JUST 2648= AS ANOTHER EXAMPLE, REQUIRED CARTON QUANTITY BACK THEN?
2649= A. I'M TRYING TO THINK WHO OWNED LITTLE BROWN IN 1995.
2650= Q. IT MAY EVEN HAVE BEEN LITTLE BROWN. WHO KNOWS? 2651= A. I BELIEVE THAT --I'LL ACCEPT YOUR STATEMENT.
2652= Q. AND DO YOU KNOW WHETHER TODAY, UNDER RANDOM HOUSE'S 2653= PUBLISHED TERMS, GENERALLY, RANDOM HOUSE DOES NOT REQUIRE
2654= CARTON QUANTITIES? 2655= A. I UNDERSTAND RANDOM HOUSE HAS CHANGED THEIR POLICY, FOR
2656= EVERYONE. 2657= Q. SO ASSUMING, THEN, FOR THE PURPOSES OF MY QUESTIONING, IF,
2658= IN FACT, LITTLE BROWN, HARPER-COLLINS AND HARCOURT BRACE, JUST 2659= TO NAME SOME EXAMPLES, BACK IN 1995 DID NOT REQUIRE CARTON
2660= QUANTITY ORDERING, WAS THERE --DO YOU HAVE ANY QUARREL WITH 2661= MR. WAGNER'S RIGHT TO ASK HOUGHTON MIFFLIN TO CHANGE ITS TERMS
2662= SO THAT IT WOULD NOT REQUIRE CARTON QUANTITY ORDERING? 2663= A. OBVIOUSLY, YOU'RE GOING TO ASK FOR THE BEST TERMS THAT --
2664= THAT ARE POSSIBLE. 2665= Q. SO YOUR ANSWER IS, HE HAD THE RIGHT.
2666= A. HE HAD THE RIGHT TO DO IT. 38
38 Page 39 40
2667= Q. NOW, I'D LIKE TO CALL YOUR ATTENTION TO EXHIBIT NUMBER 2668= 11574, WHICH IS IN THE BINDER THAT WE JUST PROVIDED.
2669= YOUR HONOR, I THINK THAT'S A FAIRLY THIN ONE. 2670= 11574, MS. SEE. IT'S WHITE.
2671= A. I DID NOT RECEIVE A BINDER UP HERE. 2672= Q. I'M SORRY, YOU DIDN'T RECEIVE IT?
2673= A. NO. 2674= Q. BECAUSE, THANKS TO APPROACHING SENILITY, I FORGOT TO HAND

2675= IT TO YOU. 2676= A. EXCUSE ME, THE NUMBER OF THE TAB?
2677= Q. 11574. 2678= A. 11574?
2679= Q. YES, MA'AM. 2680= A. IT WAS HIDING BEHIND 11566.
2681= Q. I JUST HAVE A COUPLE QUESTIONS, THAT I DON'T ASK YOU TO GO 2682= TO ANY DETAIL ON THIS. THERE ARE TWO PAGES HERE. YOU'LL NOTE
2683= THAT THEY WERE PRODUCED IN THIS LITIGATION BY TWTP, WHICH 2684= REFERS TO TIME WARNER TRADE PUBLISHING, THEREBY ANSWERING WHO
2685= OWNS LITTLE BROWN. RIGHT? 2686= A. RIGHT.
2687= Q. YOU UNDERSTAND THAT THEY DO TODAY, RIGHT? 2688= A. RIGHT.
2689= Q. OKAY. HAVE YOU SEEN THIS KIND OF A DOCUMENT BEFORE? 2690= A. I NEED TO TAKE A MINUTE AND --
2691= Q. OH, ABSOLUTELY. 2692= A. I'VE SEEN THIS KIND OF DOCUMENT.
2693= Q. NOT NECESSARILY THIS ONE. 2694= A. I HAVE NOT SEEN THIS ONE.
2695= Q. OKAY. WOULD YOU GO TO THE BOTTOM OF THE SECOND PAGE, 2696= PLEASE. YOU'LL SEE IN THE LOWER LEFT-HAND CORNER THAT IT
2697= APPEARS TO CONTAIN A DATE, 7/ 1/ 97, AND THE TERM, "RETAIL 2698= DISTRIBUTION CENTER."
2699= A. EXCUSE ME, I'M LOOKING AT A LETTER TO TIMOTHY HOPKINS?
2700= Q. NO --2701= A. I'M ON THE WRONG PAGE.
2702= Q. 11574. 2703= A. THAT'S MY TAB.
2704= Q. OH --MAY I...? 2705= MAY I APPROACH THE WITNESS AGAIN, YOUR HONOR?
2706= THE COURT: YES. 2707= BY MR. STEER:
2708= Q. PERHAPS THIS VERSION WAS CREATED ERRONEOUSLY. MAY I 2709= EXCHANGE THEM WITH YOU? THANKS. I'M GOING TO BURDEN MR. WELSH
2710= HERE WITH --WELL, YOU DON'T HAVE THAT TAB, FOR WHICH I 2711= APOLOGIZE. OKAY?
2712= A. THAT CLARIFIES IT. I'M NOW LOOKING AT LITTLE BROWN. I WAS 2713= LOOKING AT FARRAR STRAUSS.
2714= Q. JUST A QUICK QUESTION. IF YOU GO UP, JUST ABOVE THAT LOWER 2715= LEFT-HAND CORNER DESIGNATION OF THE NATURE OF THE DOCUMENT, AND
2716= YOU LOOK AT ITEM NUMBER 7 --2717= A. OH.
2718= Q. --IT SAYS, "CHANGES IN TERMS. THIS SCHEDULE IS SUBJECT TO 2719= CHANGE WITHOUT NOTICE." THAT IS WHAT IT SAYS, ISN'T IT?
2720= A. IT DOES SAY THAT, YES. 2721= Q. NOW, IN YOUR EXPERIENCE IN LOOKING AT PUBLISHED TERMS
2722= SCHEDULES THAT YOU RECEIVE FROM PUBLISHERS OVER THE YEARS, THEY 2723= GENERALLY SAY, "THIS SCHEDULE IS SUBJECT TO CHANGE WITHOUT
2724= NOTICE," ISN'T THAT TRUE?
2725= A. YES, GENERALLY THAT'S SOMETHING THEY PUT IN THERE. 2726= Q. NOW, LET'S TURN TO A DIFFERENT SUBJECT, PLEASE. I WANT TO
2727= GO BACK TO TALKING ABOUT MY CLIENT'S RELATIONSHIP, BUSINESS 2728= RELATIONSHIP, WITH INGRAM BOOK COMPANY, ABOUT WHICH YOU'VE
2729= TESTIFIED A LITTLE BIT. 2730= AND HERE, I'LL REFER YOU, IF YOU'D LIKE TO HAVE IT
2731= IN FRONT OF YOU, BACK TO THE MEMORANDUM OF UNDERSTANDING WHICH 2732= IS IN THE PLAINTIFFS' THREE-RING BINDER AT TAB NUMBER 17.
2733= SORRY THAT WE HAVE TO PLAY MUSICAL BINDERS, BUT IT'S NECESSARY. 2734= A. YES.
2735= Q. YOU TESTIFIED EARLIER ABOUT THE PROVISIONS OF THIS 2736= AGREEMENT THAT RELATE TO THE RETURNS CREDIT THAT INGRAM AGREES 39
39 Page 40 41
2737= TO PROVIDE MY CLIENTS, BORDERS AND WALDEN BOOKS. THOSE ARE SET 2738= FORTH AT PAGE 3 OF THE MEMORANDUM OF UNDERSTANDING.
2739= A. CORRECT. 2740= Q. AND THE BASE BUSINESS REFERRED TO THERE PROVIDES THAT WE
2741= CAN RETURN UP TO 5 PERCENT OF THE TOTAL YEAR PURCHASES AT 2742= PURCHASE PRICE.
2743= A. YES. 2744= Q. CORRECT?
2745= A. CORRECT. 2746= Q. NOW --I'M SORRY, I'VE MISSPOKEN. WHAT IT TALKS ABOUT
2747= ABOVE IS, "HASSLE-FREE RETURNS WILL RECEIVE CREDIT AT PURCHASE 2748= PRICE." LOOK AT PAGE 3 --
2749= A. YES.
2750= Q. --JUST ABOVE THE CHART. 2751= A. YES, I SEE THAT.
2752= Q. DO YOU KNOW WHAT "HASSLE-FREE RETURNS" ARE? 2753= A. YES, I DO.
2754= Q. COULD YOU EXPLAIN? 2755= A. YES, "HASSLE-FREE RETURNS" REFERS TO A DOCUMENT THAT COMES
2756= WITH YOUR BOOKS, AND YOU CAN SEND THAT BACK WITH THE 2757= QUESTIONABLE BOOK RECEIPTS ON IT, SO THAT YOU DON'T HAVE TO
2758= BRING UP YOUR OWN --YOU DON'T HAVE TO CREATE NEW DOCUMENTS. 2759= Q. SO THAT EXPEDITES THE RETURN PROCESS?
2760= A. CORRECT. 2761= Q. RIGHT?
2762= A. CORRECT. 2763= Q. AND THEY ARE CREDITED TO MY CLIENTS AT PURCHASE PRICE.
2764= DO YOU KNOW WHETHER, GENERALLY SPEAKING, OTHER 2765= BOOKSELLERS WHO ARE --WHO TAKE ADVANTAGE OF THE HASSLE-FREE
2766= RETURN PROCESS CAN ALSO GET CREDIT AT PURCHASE PRICE? 2767= A. I DO BELIEVE --I'M TRYING TO THINK ABOUT THE INGRAM
2768= BROCHURE, BECAUSE IT DOES REFER TO THE HASSLE-FREE IN THERE. 2769= Q. AND IT DOES PROVIDE FOR FULL PURCHASE PRICE CREDIT IF YOU
2770= USE THAT PROCESS, RIGHT? 2771= A. YES.
2772= Q. OKAY, AND THEN IT GOES ON AND TALKS ABOUT MERCHANDISE 2773= RETURN OF OVERSTOCK, RECEIVING CREDIT, ACCORDING TO THE CHART,
2774= AND THERE, THE CREDITS FOR THE BASE BUSINESS ARE --WELL,
2775= THEY'RE ON AN AVERAGE BASIS, AREN'T THEY? THEY'RE BASED ON 2776= SOMETHING OTHER THAN FULL RETURN VALUE, RIGHT?
2777= A. YES. COULD YOU DIRECT ME TO WHERE YOU JUST READ? IS THAT 2778= THE NEXT BOX OVER?
2779= Q. I'M LOOKING AT THE BOX, THE SAME BOX --2780= A. OKAY.
2781= Q. --AT THE BOTTOM OF THE PAGE 3. 2782= A. FINE.
2783= Q. THE FIRST SEGMENT ON TOP IS TITLED, "BASE BUSINESS." 2784= A. RIGHT.
2785= Q. YOU SEE ON THE LEFT SIDE IT SAYS, "RETURNS UP TO 5 PERCENT 2786= OF TOTAL YEAR PURCHASES," AND THEN ON THE RIGHT SIDE --
2787= A. RIGHT. 2788= Q. --IT SAYS, "CREDIT AT AVERAGE GROSS PURCHASE DISCOUNT OF
2789= ALL 1997 PURCHASES." ISN'T THAT RIGHT? 2790= A. YES.
2791= Q. AND SO BORDERS IS 37.88 PERCENT AND WALDEN BOOKS IS 2792= 40.59 PERCENT, RIGHT?
2793= A. UM-HUM. 2794= Q. SO FOR MY CLIENTS, THE RETURNS ARE, ON THE BASE BUSINESS,
2795= NOT MADE AT THE FULL PURCHASE PRICE, ISN'T THAT CORRECT? 2796= A. YOUR RETURNS ARE NOT MADE AT THE FULL PURCHASE PRICE.
2797= HOWEVER, THE --EXCUSE ME --BUT THE INGRAM PUBLISHED TERMS ARE 2798= THAT YOU DO HAVE A PENALTY THAT'S HIGHER THAN THIS.
2799= Q. OKAY. THAT'S TRUE FOR INGRAM'S ABA HANDBOOK PUBLISHED
2800= TERMS, CORRECT? 2801= A. I BELIEVE I READ THAT ALSO IN THEIR BROCHURE THEY SEND TO
2802= BOOKSTORES, THE SAME TERMS FOR RETURNS. 2803= Q. MOST PUBLISHERS, ON THE OTHER HAND, HAVE NO RETURNS
2804= PENALTY, ISN'T THAT CORRECT? 2805= A. WELL, NOT EXACTLY. SOME PUBLISHERS DO. THERE'S A RETURNS
2806= PENALTY --WELL, WE'RE TALKING ABOUT TWO DIFFERENT THINGS HERE. 40
40 Page 41 42
2807= ONE IS THE AMOUNT YOU'RE ALLOWED TO RETURN, AND THE PENALTY AS 2808= FAR AS DISCOUNT IS CONCERNED.
2809= Q. RIGHT, AND WE WERE TALKING --2810= A. ABOUT DISCOUNT.
2811= Q. --WITH RESPECT TO THE MEMORANDUM OF UNDERSTANDING A MOMENT 2812= AGO, WE WERE TALKING ABOUT THE AMOUNT OF THE DISCOUNT APPLIED
2813= ON THE RETURN, AND I'M STICKING TO THE SAME SUBJECT, RIGHT? SO 2814= MOST PUBLISHERS, AND THE TREND --LET ME WITHDRAW THAT.
2815= THE TREND HAS BEEN FOR PUBLISHERS TO ELIMINATE 2816= PENALTIES ON RETURNS, ISN'T THAT TRUE?
2817= A. THAT IS THE TREND. 2818= Q. AND MY CLIENTS HAVE NEGOTIATED FOR YEARS WITH PUBLISHERS TO
2819= ELIMINATE PENALTIES ON RETURNS; ISN'T THAT ALSO TRUE? 2820= A. I DON'T KNOW THAT THEY HAVE, BUT I ASSUME THEY ARE.
2821= Q. AND TO THE EXTENT THAT MY CLIENT'S NEGOTIATIONS MAY HAVE 2822= RESULTED IN THE PUBLISHERS ELIMINATING RETURNS PEN